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CBS Cuts Out Download Middleman

Times Staff Writer

CBS Corp. has spoken: When it comes to making its reality hit “Survivor” available for downloading, iTunes has been voted off the island.

The company announced Wednesday that it was experimenting with cutting out the Internet middlemen by offering downloads of its popular show for $1.99 an episode on its own website, CBS.com. The service is to be launched tonight, immediately after the show airs on the West Coast.

CBS would be the first broadcast network to sell its shows via its own Internet storefront. The move signals that CBS Chief Executive Leslie Moonves believes the network is a potent enough brand that it can go it alone -- without Apple Computer Inc.'s popular iTunes software and website -- and thus not have to split the spoils.

Network executives cautioned that the experiment, allowing buyers to view episodes of “Survivor” for just 24 hours after buying them, did not rule out the possibility that CBS later could strike a deal with Apple, which sells popular shows such as ABC’s “Lost” and “Desperate Housewives” for $1.99 an episode.

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CBS already has an arrangement to make “CSI: Crime Scene Investigation,” “Survivor” and “The Amazing Race” available on Google Video. But Google Inc. is still testing that service, and by simultaneously offering “Survivor” on both sites, CBS will quickly see which website has more traction with viewers.

“It’s been our strategy to exploit content across as many platforms as possible,” Moonves said in a news release. “This is not only a boon to fans of the show, who can now watch it at their leisure, but it also represents a great way to generate traffic for CBS.com while opening a whole new revenue stream for CBS.”

In launching the “Survivor” downloads, CBS is endorsing a different purchasing model from the one used by iTunes. On CBS.com, buying an episode would be more like a video rental, because buyers have a temporary window in which to view a show.

A buyer of an iTunes download, by contrast, can replay it endlessly.

CBS is hoping that its system may better safeguard future DVD sales of its shows.

“It’s unclear how [iTunes downloads] will affect DVD sales,” said Larry Kramer, president of CBS Digital Media.

In addition, CBS wants to protect its overseas markets. Foreign countries continue to be lucrative outlets for TV producers to resell their programming, and CBS wants to avoid violating agreements that it has for shows that have been sold overseas. Only viewers in the U.S. will be permitted to download “Survivor” on CBS.com.

CBS executives say nothing in this experiment is set in stone. Kramer said the network might tinker with its pricing, for example, to offer lower-priced shows that contain one or more commercial spots (though “Survivor” would be ad-free).

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“Survivor” was a natural choice for jump-starting the service. CBS owns the show along with Mark Burnett Productions, which means it doesn’t have to get permission from any TV production partners. What’s more, because each episode builds upon the action from the previous week, viewers who miss an episode are more likely to pay to watch an instant rerun so they will know which contestant got booted, and why.

CBS has had discussions with Apple, Kramer said, and will continue to stick its toe in the water on other entertainment-oriented websites. In September, the company partnered with Google to offer free streaming video of “Everybody Hates Chris,” a new comedy on its UPN network.

Last month, CBS offered free streaming video of two popular comedies, “Two and a Half Men,” and “How I Met Your Mother,” on Yahoo Inc.'s site. That experiment yielded nearly 500,000 downloads -- and a jump in viewership.

“We saw a pop among the younger demos the following week,” Kramer said, referring to the coveted 18- to 34-year-old demographic.

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Jupiter Research television analyst Todd Chanko said that CBS’ move may give the network leverage in negotiations with other partners.

“This goes to show the power that a broadcast network has,” he said. CBS, he said, seems “to be saying that they see no reason to feel obligated to sell their content through other sites.”

But Chanko predicted that downloading video to computers won’t replace the TV experience anytime soon. At $1.99 a download, CBS would have to sell a lot of episodes to equal the advertising revenue it rakes in for its top-rated shows.

A 30-second commercial spot in a show like “Survivor,” for example, sells for about $350,000. With 12 minutes of ads per hour-long episode, Chanko said, CBS makes as much as $8.4 million. Since CBS runs two installments of “Survivor” each year, each with 13 episodes, that means the network takes in about $218 million a year in ad revenue. Even if CBS gives Burnett a cut -- say $52 million a year -- that would mean CBS itself would still take in about $166 million, Chanko estimated.

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“At $1.99 a download, to make the same amount, they would need 83 million downloads a year,” Chanko said. “It’s all about the numbers.”


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