Gauging the Value of TV Anytime

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Will consumers be willing to pay to see every episode of Nip/Tuck or The Closer? As Comcast Corp., DirecTV Inc. and Apple Computer Inc. for the first time start charging for selected shows from the “Big Three” broadcast-TV networks, ABC, CBS and NBC, cable networks such as Home & Garden Television and Turner Network Television are considering whether they should charge fees for their shows as well, which now appear for free in on-demand services provided to viewers by system operators such as Comcast.

But charging a la carte for TV shows could tax consumers’ wallets and potentially derail the on-demand-for-pay gravy train.

Turner Network Sales executive vice president of sales and marketing Coleman Breland, for one, said the deals could signify a watershed event for the industry. But he isn’t convinced consumers will choose to pay for programming like CBS’s Survivor — when they can simply save it onto a digital video recorder when it airs.

“For the consumer, the question is 'How important is the 99 cents versus what’s the capability of the DVR?’ ” Breland said. But if “the take rate is incredibly high, a model has then revealed itself.”

Until now, cable network programming has been offered free to consumers in on-demand services, as a carrot to help operators get them to sign up for a slew of digital services and connect new digital boxes to their TV sets.

Programmers such as USA Network, FX and TNT have resisted putting highly rated original programming like Monk, Nip/Tuck and The Closer into such services, until it somehow becomes lucrative for them to do so.

Now, charging 99 cents or $1.99 per episode — as with the ABC, CBS and NBC deals — has opened the playing field.

This “is a very appealing approach if it can scale,” said Scripps Networks senior vice president of emerging media Channing Dawson.

Up to this point, the cable-programming networks have had difficulty convincing system operators that its shows are valuable enough to charge consumers a nominal fee. A typical episode of Nip/Tuck, the plastic-surgery drama, is watched by 3.9 million viewers, while CSI, available for $.99 per episode on Comcast when downloaded, is seen by more than 28 million TV viewers each Thursday night.

“This is part of the negotiations between programmers and the satellite and DBS companies that has often times led to free on-demand product,” said Leichtman Research Group Inc. principal analyst Bruce Leichtman.

And Comcast will continue its hard-line approach to free cable content. Comcast On Demand vice president and general manager Page Thompson said on demand fees will only apply to broadcast network programming and not to cable content. Only 5% of all on demand viewing has been fee-based, he added — and that’s mostly Hollywood studio product.

“In the past we’ve charged for the Hollywood movie content, but now we’ve set a precedent for the broadcast content,” Thompson said. “But our strategy is fundamentally that the free on-demand content is what has attracted users to our platform and what will keep driving the majority of our viewers.”

Even if cable programmers are able to charge a fee for their products, when they are delivered on demand, Leitchman says that too much pay-per-view product could ultimately backfire on the industry. “Sticker shock” could result, said Timothy Hanlon, senior vice president/director of emerging contacts for Starcom MediaVest Group.

“That shock will hit once you see an era of highly variable cable bills every month,” he said.

To avoid that, consumers could be asked to sit through several ads before watching free programs on demand, said Jimmy Schaeffler, senior multichannel research analyst at The Carmel Group in Monterrey, Calif.

Linda Moss and Matt Stump contributed to this story.

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