As television networks and producers scramble to catch the wave of video-on-demand programming, local TV stations have been left stranded on the beach.
But today, Warner Bros. Television Group is throwing a line to stations eager to test the waters. Warner plans to offer broadcasters the right to stream on their own websites older episodes of its popular sitcom “Two and a Half Men.”
The deal is significant because it represents the first major syndication package that bundles a program’s over-the-air broadcast rights with its broadband rights. It also shows how Hollywood is aggressively exploring how best to exploit technology to wring as much money as possible from its shows.
Until now, most of the network video-on-demand deals have bypassed stations, and only recently have started to include advertising. Last week, CBS Corp. launched its own ad-supported broadband channel, Innertube. It will offer CBS programs and features such as “Survivor,” original shows produced for the Web and, possibly, even old episodes of “The Brady Bunch” or “I Love Lucy.”
Walt Disney Co.'s ABC network also is running its own two-month experiment: a mini “theater” on its website where viewers can watch episodes of “Lost,” “Desperate Housewives” and “Alias.” The move comes six months after Disney, and then NBC Universal, struck separate deals with Apple Computer Inc. to sell downloads of their popular shows, without commercials, on the iTunes store.
But those deals riled station owners, who have long been the backbone of the TV distribution system. They worry that too many viewers will click a computer mouse in lieu of a TV remote to watch their favorite shows. If that happens, commercial time could diminish in value, driving down ad rates.
“The stations have sort of been out there as dinosaurs, left to perish in this new digital world,” said Stacey Lynn Koerner, president of Interpublic Media’s viewer research unit, the Consumer Experience Practice.
Warner is offering its sweetener on the theory that it will enhance the value of its syndication packages to stations, which hopefully can use the broadband offerings to build a lucrative Web business.
“What we are saying to the local stations is that ‘you are going to be our partner,’ ” said Bruce Rosenblum, president of Warner Bros. Television Group. “We are going to provide stations with A-level content for their websites, to maximize the value of their websites, and provide them a second revenue stream.”
To be sure, the Time Warner Inc. division also hopes to protect its syndication sales to stations, a lucrative profit center. Studios potentially can earn huge amounts selling reruns of their hits. Since 1998, for example, the Warner sitcom “Friends” has hauled in about $2 billion.
Warner is expected to cash in on “Two and a Half Men,” starring Charlie Sheen and Jon Cryer as brothers living like a present-day “Odd Couple,” albeit not to the extent it did with “Friends.”
Later this week, Warner will begin an auction among the station groups for its 90-episode collection of the series. The company is hoping that with the Internet streams added as a bonus, station groups will bid more than $2 million an episode. (The deal does not include original first-run episodes since those have already been sold to the CBS network.)
Warner’s approach is intriguing in that it attempts to preserve the traditional way studios make money through syndication, said Leland Westerfield, a broadcasting analyst with Harris Nesbitt.
“This respects the integrity of the syndication window and reassures TV station owners, who are putting down large commitments for programming, that they will still play a central role in program distribution,” Westerfield said. “It suggests that perhaps the stations are less threatened by Internet platforms than most people believe.”
Warner said that beginning in the fall of 2007, stations would begin airing the reruns of “Two and a Half Men.” The deal would allow the local TV stations to stream five episodes a week on their websites. Computer users would be able to watch, but not download, episodes and would be able to fast-forward or rewind portions of the show.
The episodes would contain commercials, Rosenblum said, with Warner getting 50% of the online ad revenue. Internet users would not be able to skip or fast-forward through the ads.
“You’re going to see a lot of interest from local advertisers,” said Brad Adgate, research director for ad-buying firm Horizon Media.
He said Warner’s deal was particularly attractive because “Two and a Half Men” was TV’s highest-rated comedy. “It’s going to be affordable for a lot of people who could not afford to buy time in the show in syndication, let alone during its network run,” Adgate said.
TV station groups are watching closely.
“Everyone is experimenting with different forms of distribution right now,” said Dunia Shive, president of media operations for Dallas-based Belo Corp. “I believe there is, and will continue to be, an acknowledgment of the strong promotional platform a local affiliate can provide to its network partner, and I expect us all to find ways to work together.”