Loyal ‘Simpsons’ Fans Fetch Higher Ad Rates on Web (Update1)

June 25 (Bloomberg) -- Television programs such as “The Simpsons” and “CSI” are for the first time commanding higher advertising rates at Web sites including Hulu.com and TV.com than on prime-time TV.

The premium rates in the just-ended 2008-2009 television season are mainly for shows that rank among the most-watched by Nielsen Co., said David Poltrack, chief research officer at New York-based CBS Corp., which is home to “CSI” and owns TV.com.

Marketers, who are now considering commitments for the 2009-2010 TV season, are willing to pay more because TV.com and Hulu.com, owned by investors including News Corp., NBC and Walt Disney Co., provide committed viewers who actively seek out shows. There are fewer commercials, and consumers are twice as likely to recall Web ads, Poltrack said, citing Nielsen.

“The reason people are paying such a high premium for these ads on the Internet is they do have a captive audience,” Poltrack said. “You know you have eyes on the screen.”

The challenge for the networks, whose total prime-time audience shrank 3.6 percent last season, is that Web viewing and ad sales, while increasing, are still too small to replace traditional revenue sources.

CBS’s April 6 broadcast of the U.S. collegiate basketball championship game, for instance, attracted 17.6 million viewers, according to New York-based Nielsen. By comparison, the network’s Webcast of the championship tournament starting in March drew 7.52 million unique visitors, according a statement.

TV vs. Web Rates

CBS, owner of the most-watched broadcast network, gained 19 cents to $7.21 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have lost 12 percent this year. New York- based News Corp., whose Fox network airs “The Simpsons,” added 16 cents to $9.15 and is little changed this year.

Marketers typically pay $20 to $40 per thousand viewers for a prime-time ad. On Hulu, which began offering shows to the public in March 2008, an ad on the animated series “The Simpsons” costs $60 per thousand viewers, Michael Nathanson, an analyst at Sanford C. Bernstein & Co. wrote in a June 18 report.

“It ends up being twice as expensive in the Internet world,” said David Cohen, U.S. director of digital communications at Universal McCann, which is owned by the New York-based advertising company Interpublic Group of Cos.

That isn’t deterring companies from buying time.

Intel Corp., the world’s largest semiconductor manufacturer, has shifted spending to sites including Hulu, which streams TV shows from NBC, Fox and soon ABC, as part of a $100 million worldwide marketing campaign, according to Arlene Villanueva, global media director for the Santa Clara, California-based company.

‘All the Comedies’

“Hulu has all the comedies on NBC, Fox and now ABC,” Villanueva said in an interview. “Most of those fans will watch the finale again or catch up on episodes they missed. It’s a great opportunity to be smart and reach our audience.”

General Motors Corp. will direct brand-building dollars to premium videos on the Internet while it works to emerge from bankruptcy, said Betsy Lazar, executive director of advertising and media operations for the Detroit-based automaker.

“As the economy improves, we expect that demand for premium programming on the Internet will increase as well,” Lazar said in an e-mail.

The gains from Web ads only partly counter the loss of traditional advertising for Fox, Walt Disney’s ABC, CBS and General Electric Co.’s NBC. At CBS, interactive revenue amounted to 6 percent of the $2.23 billion in first-quarter TV sales, according to a May 7 company statement.

Siphoning Off Viewers

Nathanson, based in New York, estimates ad sales at the four networks will drop 10 percent this year to $12.8 billion.

Networks also risk siphoning off prime-time audiences to sites with less inventory and lower ad sales, the analyst wrote.

A “Simpsons” episode on Hulu has just 37 seconds of ads, Nathanson wrote. A broadcast episode has nine minutes and produces three times the revenue per viewer at half the price, he estimated.

“The networks should be very careful that the move to the Web does not cannibalize the core business,” Nathanson wrote.

NBC and ABC declined to comment on rate comparisons.

Closely held Hulu attracts clients by delivering “their target audience,” Jean-Paul Colaco, senior vice president of advertising, said in an e-mail. The site “is delivering value that is resonating with our advertisers,” including more than 40 million users a month.

Disney Investment

In April, Burbank, California-based Disney acquired a 27 percent stake in Los Angeles-based Hulu for about $35 million, becoming a co-owner with News Corp. and New York-based NBC Universal and agreeing to supply shows and films.

News Corp., Disney and NBC sites, including Hulu, ranked among the 10 most-visited for videos in the U.S. in March, according to ComScore Inc., the Reston, Virginia-based researcher, showing the companies are retaining viewers migrating to the Internet. Time Warner Inc. and Viacom Inc., both based in New York, also have top 10 sites, as does CBS.

IGN Entertainment, News Corp.’s Web site for video-game fans, charges as much as $45 per thousand viewers and has advertisers including Activision Blizzard Inc., the largest game publisher, McDonald’s and Burger King, said Charlie Barrett, senior vice president of sales for the Brisbane, California- based company.

“The viewer made a selection, and the advertiser knows you are waiting for the selected content,” Barrett said in an interview. “That’s a powerful advertising moment.”

Poltrack said lower-rated shows won’t command the same prices as popular programs, and that ads on those series aren’t any more valuable than basic, static banners on Web sites.

“This is about scarcity,” Poltrack said. “All of the networks who are now streaming online have multiple advertisers competing for a small supply of premium programs. That premium content is what advertisers want.”

To contact the reporters on this story: Brett Pulley in New York at bpulley@bloomberg.net; Andy Fixmer in Los Angeles at afixmer@bloomberg.net

To contact the editor responsible for this story: Rob Golum at rgolum@bloomberg.net