The Broadcast Networks are Reinventing their Business Models

Implications: Beyond DVR ratings, the broadcast networks are recognizing that the Internet is the new window for revenue.

Analysis: The broadcast networks, CBS, ABC, Fox, NBC and The CW (merged UPN and the WB), have spent the past few years reinventing their business models; adding DVR viewings to their ratings is another tweak to the model. Beyond DVR ratings, the broadcast networks are recognizing that the Internet is the new window for distributing their programming and during 2007, broadband distribution continues to be an important source of growth.

Case in point: CBS says 53 percent of viewers who watched a new show this season online, did so before viewing any episode of that show on a broadcast network. Internet access is providing a new means to expand the sampling of new programs.

The market for advertising surrounding online streaming of broadcast network shows is on the upswing, with demand exceeding supply for top-rated shows. The market is estimated to be in the $300 million–$400 million area today with a projected growth to about $2 billion to $3 billion by 2010. If this market materializes, it will add a second revenue stream for broadcasters.

Despite the strength of the broadcast TV marketplace and the adding of DVR ratings, most analysts are still not projecting much overall ad growth for the broadcast networks this year. Partly because there is no NBC covered Olympic Games in 2007, plus the merging of UPN and the WB into The CW network means there are far fewer ratings points than there were in 2006.