NBC executives had two reservations about putting full-length episodes of their current lineup online, says George Kliavkoff, NBC Universal's (GE) chief digital officer. The first was that no one would watch. The second was that everyone would watch"”and then stop watching TV.
It was the former concern that seemed most likely to derail the company's digital effort. Conventional wisdom held that the computer was for clips, that people liked snacking on short movie trailers, TV clips, and strangers' two-minute home videos. How else to explain the millions flocking to YouTube, the video-sharing site acquired by Google (GOOG)‾ But how many TV fans would bother to watch a 30-minute TV show on a small player or a 17-inch screen, especially if they have a 42-inch-plus, high-definition screen waiting at home‾
Lots of them, apparently. Since last fall, when many networks began streaming full-length episodes of their prime-time shows online, Web surfers have shown a willingness to sit in front of the computer and watch TV-length programs (see BusinessWeek.com, 10/11/06, 'Click Here to Catch Up on CSI'). NBC has had 100 million streams of its shows since last fall. 'Lots and lots of people are doing this, and they are sitting through entire episodes,' says Kliavkoff.
Not just for couch potatoes
It's that growing desire to watch online TV for increasingly long stretches that helps explain the enthusiasm for Joost, the Internet television service begun by Skype (EBAY) founders Janus Friis and Niklas Zennstrom. The service, which has been available to invited users, boasts the ability to deliver full-screen, high-quality video content on the computer. On May 10, the company said it got $45 million in funding from Index Ventures, Sequoia Capital, CBS (CBS), Viacom (VIA), and the Li Ka Shing Foundation. 'Joost allows content owners to reach an audience of any size at any time where the viewer can 'lean back' to enjoy an immersive yet interactive video experience,' Roelof Botha, general partner of Sequoia Capital, said in a statement.
The change in TV watchers' habits also explains why companies such as News Corp. (NWS) and NBC Universal are partnering to launch their own tools and sites for premium online TV content (see BusinessWeek.com, 3/23/07, 'YouTube May Have Met Its Match'). If people are watching long-form content on the Web already, even before the long-awaited devices that promise to beam computer content to the big screen, then millions more will watch when quality improves. 'This is an opportunity,' says Kliavkoff, who also serves as the interim CEO of News Corp. and NBC's joint venture.
Warner Bros. sees Joost and similar services as a chance to make extra advertising money from older shows that are no longer in syndication as well as from newer series. The company is offering a channel of its sci-fi shows through Joost and plans to offer more programming through similar services such as on Time Warner's (TWX) AOL In2TV site.
'There are a lot of places where you go and have a device that has Internet access with you,' says Craig Hunegs, executive vice-president for business management at Warner Bros. Television Group. 'I would imagine that there are people at work who are spending time watching television in their office that never had a television in their office before.'
It's TV whenever, wherever
Network executives and analysts agree that the desire to 'time shift,' to watch prime-time programming at other times of day, is driving the consumption of full-length TV dinners, rather than two-minute snacks. Many viewers use the Internet as a convenient way to catch up on favorite shows they have missed or try out shows that they never were around to see before. 'People are using the Web really as a substitute for their VCR and their DVR,' says James McQuivey, principal media analyst at Forrester Research (FORR), referring to digital video recorders, such as TiVo (TIVO) (see BusinessWeek.com, 5/11/07, 'A New Fix for the TiVo Fan').
Mania TV, a popular online network featuring original and live celebrity programs, has viewers for its hour-plus shows, says Peter Clemente, chief marketing officer at Heavy. On average, viewers watch more than 20 minutes straight. If you don't count those passing users who come in occasionally to see one short clip, perhaps on a friend's recommendation, the average viewing time increases to 43 minutes, says Clemente. 'There is a large segment of the population out there that is looking for good premium content and is willing to invest their time,' says Clemente.
That willingness to watch makes networks happy"”provided they don't watch so much PC that they stop watching TV. Networks such as NBC now argue that the Web increases television viewing by getting new audiences interested in shows they otherwise may not have watched. As the quality improves, however, more people might simply opt to watch on demand, where they only have to sit through a few commercials, rather than a few dozen, and don't have to worry about rushing home. 'When enough of these shows are in broadcast quality, people will say, 'If I don't make it, I can always catch it on the Internet later,'' McQuivey says. 'It's a slippery slope.'
Covering their digital bets
The networks are loath to cannibalize their audience. But they also don't want to ignore digital distribution and end up getting passed by or inadvertently fueling piracy"”as some say the music industry did when it failed to jump on the digital bandwagon early. That's why networks are hedging their bets, investing simultaneously in making the TV experience better with high-definition shows and in efforts to distribute shows online.
Right now, many networks are largely saving their current prime-time shows for their own online sites, or refusing to air them online at all, and giving services such as Joost shows from the archives. However, if Joost proves popular, they're likely to release more from the store. After all, if IPTV set-top boxes take off, there might not be a distinction between streaming online and TV on demand. That's why McQuivey thinks the networks invested in Joost. 'They were all putting a bet, saying, 'We believe in Internet-delivered television.''
Holahan is a writer for BusinessWeek.com in New York.
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