For the networks, television's future is online

The launch of online syndication sites such as hulu.com underscore how television companies are using the Internet to leverage their key asset: well-made content.

from the March 14, 2008 edition

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As the Digital Age matures, the model of free content is becoming the golden ring of the Internet. Consumers are tiring of paying fees beyond those for the Internet and cellphones. "They want their content free," says Mr. Poltrack.

Freedom of access is an important cornerstone of the media age, says David Wertheimer, executive director of Entertainment Technology Center at the University of Southern California School of Cinematic Arts. The TV networks have more than half a century of experience in delivering free content using advertisers' dollars.

Even so, the networks have occasionally stumbled. Last month, NBC tried to transplant "Quarterlife," an Internet series, to regular TV only to cancel it after just one barely seen episode.

But the networks' mistakes are instructive to newcomers. "I love having these big dinosaurs lumbering around the Internet," says Kip McClanahan, CEO of ON Networks, an online video site based in Austin, Texas. On the other hand, he adds, the networks still have the money to finance high-quality content.

But such online ventures may unravel the very structure of the networks, a business model that relies on affiliated stations to distribute network content, observes Mr. Thompson.

As the networks find more viable ways to make money putting their TV programs online, the hundreds of affiliates that used to be the exclusive outlets for these shows could be hurt, says entertainment lawyer David Oxenford, a partner in the Washington, D.C.-based Davis, Wright, and Tremain. He points out that local stations rely on prime-time programming to draw audiences to the local advertisers that support the stations. "Local news has always been a mixed bag, but at least it's something," says Mr. Oxenford. "If the local stations can no longer afford to do local coverage, then the community could lose."

Even in remote corners of the country, such as Eureka, Calif., local ABC affiliate (KAEF) station manager Alan Kammersgard says he sees the handwriting on the digital wall. He knows everything is moving online, and when that happens, "our advertising dollars will be going online, too."

As networks redefine their relationship to local affiliates, these stations may be an important part of the evolutionary process. When all broadcasts go digital next February, stations will have multiple broadcast tiers on each channel, opening the door to far more local programming.

"What we're probably going to see, as all this programming moves online, is a whole new meaning for the word network," says Thompson.

• Monitor intern Alison Tully contributed to this report from Los Angeles.

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