New World Explorers

Cable operators, big and small, are concerned with the influence digital content distribution, particularly over the Internet, will have on their business. So are their colleagues in the programming community, especially those at TV networks owned by media conglomerates such as Bravo, Sci Fi and USA (NBC Universal), MTV Networks (Viacom) and ESPN, ABC and Disney Channel (Disney). These flagship TV brands and their must-see programming—ESPN’s Monday Night Football, Bravo’s Project Runway and Disney Channel’s High School Musical, for instance—will, for the foreseeable future, continue to be the cornerstones of cable operators’ video product.

It’s not a surprise then that operators are nervous when programmers take their hit content to PCs and handheld devices using digital platforms that exclude them. Also distressing are broadband video channels such as DisneyChannel.com or MTV Networks’ broadband spin-offs Overdrive and VSPOT that let Web surfers directly access TV series. After all, cable operators also are in the broadband business and soon the mobile business. Programmers argue that officially branded streaming, downloading and other Web video distribution channels thwart online piracy and boost the value of cable and bundled offerings. But that argument also holds true for the high-speed DSL and television services offered by phone companies.

So when NBC Universal Cable struck a deal with Wurld Media last November to distribute its hit series and Universal’s movie titles for 24-hour Web rentals using peer-to-peer sharing technology, should operators have perceived it as an end run around cable?

We asked NBC Universal Cable’s David Zaslav, the architect of that experiment, and a few of his fellow digital strategists to explain how their distribution plays influence their cable affiliates. The consensus? "Hey, it’s our content and we’d be fools not to monetize it." But they’re not going to upset the relationship they’ve created with cable just to hitch a ride on the Apple cart. NBC Universal

David Zaslav

President, cable and domestic TV and new media distribution NBC U calls it “TV360”—a catchphrase for its “television 2.0” vision that the company is using to reorganize its ranks, including promoting David Zaslav in May. In keeping with the companywide zeal for new content delivery platforms that expand on its traditional businesses, Zaslav added broadcast television and digital channels (Internet and wireless) to his cable distribution bailiwick.
Sure, NBC U’s digital media president Beth Comstock leads new media efforts and president of digital content and cross-network strategy Jeff Gaspin oversees entertainment synergies between the company’s TV networks and off-TV platforms. But the digital executive to watch is Zaslav. His years of experience in cutting cable deals for linear and on demand make him ideally positioned to navigate television’s expanding digital horizons, from the impact on distribution windows to expanding to wireless and other new platforms. 
The pressure’s on digital distribution to make up for losses in the television division. NBC U owner General Electric is run by Jack Welch-honed bean-counters, and their patience long ago wore thin with the TV ratings slump at NBC broadcast. NBC slid from No. 1 in the desirable 18-49 ad demo to last place for the past two seasons.
Zaslav, a tough negotiator who refused to give operators free VOD content in return for linear distribution of his networks, is ably supported in his aggressive digital plans by CFO and SVP of new media J.B. Perrette, who’s helping create nonlinear and high-definition distribution opportunities for the company’s networks and content.
NBC U’s digital zeal isn’t just internal; in July Zaslav’s team announced Digital World, an affiliate marketing campaign designed to help NBC U’s cable distributors sell HDTV, VOD, broadband and DVRs. Cox Communications will be the first MSO to launch the campaign this fall, starting in San Diego.
Any digital distribution deals Zaslav considers, let alone cuts, must meet his strict guidelines: One, NBC U’s content must be piracy-proofed. “Even if it’s the greatest platform, if it’s not protected we won’t put our content on there.” Two, “the economic model makes sense for us [and] there’s a model we can build on.” Three, there must be an opportunity for NBC U to sell ads. “The advertiser is our customer and they want to be part of these new platforms.”

TACTICS:

• A deal with Apple’s iTunes in December brought USA’s Monk, Sci Fi’s Battlestar Galactica and NBC’s The Office, among other hits, to the iPod.

• Other content deals in the paid downloading space include offering NBC Universal TV content to CinemaNow, MovieLink and Netflix.

• A first of its kind Internet distribution deal in November brought NBC U’s library to the peer-to-peer space via a legitimate P2P player, Wurld Media.

• A promotional video deal was inked in June with YouTube, a user-generated website that streams more than 70 million viral videos daily. 

• NBC U’s entertainment networks—Bravo, USA, Sci Fi—have launched broadband offshoots; Bravo boasts three unique broadband brands including BrilliantButCancelled.com, which leverages the TV series it acquired for its now-defunct pop culture programmer, Trio.

• Sneak peeks on popular Web portals include USA’s exclusive run of a special touting the new season of The 4400. It ran on Yahoo TV for eight days in May, followed by video streaming of the special on usanetwork.com and scifi.com.

RESULTS:

Digital revenue isn’t disclosed but GE told Wall Street that of the estimated $1.7-$1.9 billion that NBC U sold in non-sports commercial time in this year’s upfront, $50 million went to digital media ads (such as online) separate from its linear networks, broadcast or cable. An additional $200 million of upfront money involved multi-platform deals that incorporate its new media and linear network television properties.

WHAT IT MEANS FOR CABLE:

Complexity could help operator-programmer relations. Since operators are in multiple businesses, they have more to discuss with programmers that, like NBC U, offer varied content to slice and dice (for a price), Zaslav says. “It’s easier to find common ground when you have more pieces to the puzzle.”

(For more from Zaslav, click here.)

Disney

Albert Cheng

EVP, digital media, Disney-ABC Television Group Albert Cheng makes a huge splash with each new media deal he executes. The company’s treasure trove boasts globally recognized killer content for kids and sports fans from its Disney Channel and ESPN brands. He’s backed by deep pockets to craft and test groundbreaking media deals and has the blessing of his bosses, Disney CEO Bob Iger and Disney Media Networks co-chairman Anne Sweeney. As a result, he’s got (almost) carte blanche to test delivery avenues that take the company’s lineup of TV shows onto the Internet and beyond.
His charter programming deal last year to offer ABC series (Lost, Alias, Desperate Housewives) and hit kids’ series from Disney Channel such as That’s So Raven via Apple’s iTunes online store established a price point ($1.99) for paid downloads of TV shows. It also made headlines around the world. But despite the noise over what Cheng describes as tests of changing consumer needs, he’s adamant that he’s not bypassing his cable affiliates.
He points to how he tested subscription video-on-demand models with Cablevision and Insight Communications and online exclusive content such as Disney Connection, a gated broadband kids service, with Comcast. His goal is to capitalize on emerging platforms that will provide new revenue streams while boosting ratings—and not ruffling affiliates’ feathers. He doesn’t have to just worry about the company’s well-feathered cable affiliates—he also has to keep its flock of ABC broadcast affiliates in mind.
“As long as we keep the focus on the consumer and use that as the guiding principle…[we’ll figure] out the details of how all this works between all the different constituents,” Cheng says.

TACTICS:

• In May, Cheng and Co. launched a two-month pilot offering free (ad supported with limited commercial interruption) downloads of episodes from four TV series on ABC.com, a trial that’s now permanent.

• Last year’s landmark deal with Apple to offer ad-free episodes of hit TV series on iTunes for $1.99 was this month enhanced with free iTunes downloads of select episodes to ABC.com visitors.

• Broadband video on DisneyChannel.com and other website offshoots of Disney’s TV brands (SOAPnet, ABC Family, Jetix, ABC News) has followed the lead of ESPN360, which is now in over 8 million homes.

RESULTS:

• Disney TV content attracted more than 6 million paid downloads on iTunes between October and June, according to Disney.

• Ad-supported downloads on ABC.com in May and June totaled 16 million, 11 million in the first month alone.

• The June launch of DisneyChannel.com’s video player served more than 11.4 million streams in its first two days.

• ESPN360 delivered 40,000 streams at a time during this summer’s World Cup soccer tournament.

• Disney doesn’t disclose revenue from its digital forays but says it’s above projections, even though it’s still a small fraction of the company’s overall TV-related businesses.

RESULTS:

Cheng says his goal isn’t to slay linear viewing, bypass distributors or his company’s ABC stations.
“All our content is still rooted in [linear] television and all these digital platforms…help bolster that value.” Cheng says these digital tests aren’t cannibalizing linear ratings. Case in point: Episodes of Disney Channel’s The Suite Life of Zack and Cody that premiered on DisneyChannel.com in May still achieved a No. 1 rating with kids 2+ for their linear debut. And the top reason for downloading cited by ABC.com visitors? They missed the linear debuts. When it comes to hit series, Cheng says online and linear programming can coexist.
Viacom

Nick Lehman

EVP, digital media, MTV Networks Viacom’s MTV Networks offers some of the most desirable (to advertisers and viewers) youth-skewing TV brands on the planet: Nickelodeon, MTV, VH1 and Comedy Central. It was the first multi-network programmer to create a chief digital officer role, to make the word “multiplatform” a mantra in affiliate and ad sales pitches and to launch a slew of broadband offshoots for each of its linear brands, featuring buzzy names like Loaded, MotherLoad, VSPOT and Overdrive.
Yet seven months after being named MTVN’s first CDO, Web savant Jason Hirschhorn resigned in June. And earlier this month Viacom’s impatient chairman Sumner Redstone fired MTV veteran Tom Freston, who was made Viacom president and CEO when the company was divided last year. Redstone’s reasoning: Freston failed to boost the company’s stock price with smart digital moves. Redstone griped that MTVN and Viacom passed on acquiring the teen-centric website MySpace, now run by Rupert Murdoch’s Fox Interactive Media division.
So the pressure’s on at MTVN, where Nick Lehman continues to spearhead digital strategy for its music and media brands and products. “So much of our content—being short-form in nature, and very topical and easy to consume in bite-sized portions—plays perfectly into the mobile experience today,” he says.
Getting on iTunes was a no-brainer for MTV but Lehman is most excited about the next step: fostering virtual communities around “differentiated content” relating to (but not mimicking) MTVN’s TV brands.

TACTICS:

• Created unique services such as Urge, a music downloading service that leverages MTV’s longstanding place in pop culture and music.

• Acquired websites that are hot with kids and advertisers, such as Neopets, Xfire and GameTrailers.

• A licensing deal with Universal Music Group brings content from Bon Jovi and other artists to mobile services for MTV, VH1, CMT and Logo.

RESULTS:

• On the upside, being youth-savvy and laser-focused on digital opportunities paid off when MTVN struck cable’s first upfront deal this summer—a multi-network, multiplatform smorgasbord worth an estimated $300 million—with 30 clients of the OMD ad agency.

• On the downside, Freston’s firing and Hirschhorn’s resignation show it’s tougher than ever to meet or anticipate the needs of its audience of media-savvy kids and teens.

WHAT IT MEANS FOR CABLE:

Cable subscribers “are our audiences as well,” says Lehman. With MTVN already the biggest creator of video for mobile phones, and more than 60 wireless carriers internationally carrying its content, Lehman says he wants to do “some unique things” for cable operators, such as creating unique MTVN content for them as they move into wireless services.

Eyes on the Prize
Unique digital programming moves by other new world explorers. Steve Schiffman, National Geographic Channel EVP, marketing and new media, used corporate synergies to test digital marketing and distribution of content. Schiffman says NGC’s MySpace (owned by parent Fox) page for its Blackbeard special “got a ton of hits and virally promoted our show.”  Coleman Breland, EVP, sales and marketing, for Turner Network Sales, has wireless top of mind. He wants to go even more mobile with content “across animation, news, entertainment and sports with Cartoon Network, Adult Swim, CNN, TCM and NASCAR.com.” Don Baer, senior EVP, strategy and development, Discovery Networks, is looking at “Web-based affinity networks,” such as online communities of pet lovers, as a way to promote his TV brands. “If you’re Animal Planet, it’s pretty easy to imagine why that would be a great place.” Rob Hayes, Showtime’s SVP and GM of digital media, fostered online buzz this year with user-generated content. The L Word experimented last season with fan-written “fanisodes” at lword.fanlib.com. Expanding on that text-based test, Hayes next wants to incorporate video into fanisodes “so people can submit clips in an irreverent way” and promote Showtime’s original series. Ron Feinbaum, SVP and GM of interactive for Scripps Networks, is launching a slew of what he calls “broadband verticals” such as DIY’s woodworking mini-website. “We’ve got about 80 different ideas in the queue” he says; advertiser interest helps push ideas to the top.