A few years ago someone called a friend of mine "the prettiest blogger." This, she noted, is rather like being called "the tallest short person." The same may be true when it comes to picking the smartest TV company playing in the online world, but in this milieu the tallest short person is CBS (CBS ).
Since mid-April it has inked partnerships with two dozen partners—from Bebo to Veoh—to syndicate its programming online. (CBS will generally receive 90% of the ad revenue sold around its content.) It has bought interesting online players, both large (music-based social network last.fm for $280 million) and small (daily financial video startup Wallstrip, for an undisclosed, much tinier sum). CBS also passed on taking an equity stake in the still-unnamed Web-video site that NBC Universal (GE ) and News Corp. (NWS ) are assembling, because that would mean exclusively syndicating shows with the venture. That stake "might be huge down the road," concedes CBS CEO Leslie Moonves. But he says the point of CBS's current moves is not to have one big property with "an equity upside 10 years from now." Instead, CBS wants money coming in from myriad directions, so that if future critics say, "'Gee, your primary source of revenue isn't as high as it once was,' we can say 'That may be true. But we have 30 other sources that make the absolute gain significantly bigger.'"
EVEN IF CBS HAS BET CORRECTLY, it's still a big stretch to think all will turn out that neatly. But such thinking, and the attendant deals—thanks to the team led by fast-talking Quincy Smith, CBS's yearling president for interactive efforts—have led CBS into legitimately interesting territory for a multibillion-dollar media company. The ethos online—true even if clichéd—is being willing to give up control, and CBS is on the far end of the bell curve when it comes to indulging fans who want to play with its programming. All networks at this year's upfront presentations lunged desperately to show they were down with the cool kids online. CBS flaunted a YouTube (GOOG ) video that strung together a montage of CSI star David Caruso's monumentally portentous one-liners. "Mash-ups—I look at 99% of them as a great promotional tool," says Moonves. Mash-ups and mix tapes (or CDs) are crucial for introducing fans to new voices in hip-hop, to cite one example. But you would have a hard time finding a music executive in Moonves' position who would say that.
Not long ago, the shining hope for TV was that "on-demand world" meant "people buying programs." In October, 2005, ABC first sold full-length programs on iTunes and won kudos as paid downloads ticked into the millions. But a few million sales at $1.99 per are barely felt at a company grinding out revenue by the billions, and in 2007 CBS espouses a nuanced view. "Three-fourths of our business" is ad-supported, says Smith. "We'll stick to what we know." So ubiquity trumps pay-per-download. Which makes sense both for a company that gets most revenues from a free-programming model and for today's environment. Web surfers want to get free stuff, not buy what's free elsewhere. (Although there's no downside in selling shows on iTunes, as CBS still does.)
Smith also openly muses about the limits of streaming full-length TV programs: "It's arrogant for me to assume that regurgitated content is what's going to work on the Web." This leads him to the likes of Wallstrip. And to last.fm, which built a thriving social network around users recommending music, which could have big implications for CBS's TV and radio assets. All this could end in tears, obviously, and is so new that there's far more potential than profit. And all the Web wisdom in the world won't help CBS if the hits dry up. But CBS's moves are coherent philosophically, and about as in tune with how people behave online as one may expect a traditional company to be. Whether its competitors are teeny or titans, CBS can still walk tall.
For Jon Fine's blog on media and advertising, go to www.businessweek.com/innovate/FineOnMedia
By Jon Fine