March 4 (Bloomberg) -- CBS Corp. will begin selling new commercials in “NCIS” and other programs that viewers watch on demand using their cable-TV service, a bid to generate revenue from audiences who watch shows on a delayed basis.
The new commercials will appear three days after a program is broadcast, Jo Ann Ross, CBS’s head of advertising sales, said in an interview. CBS, the most-watched TV network, starts taking orders today, she said.
Broadcast and cable channels are trying to extend ad sales to younger viewers who shun program schedules and watch shows after the three days advertisers pay for now. Comcast Corp.’s NBC and 21st Century Fox Inc.’s Fox already use so-called dynamic advertising to put spots into shows on demand, giving marketers the flexibility to change commercials on short notice.
“We’re getting paid by the cable operators for video on demand and now we will be able to put in ads after a several days and get paid for that,” Les Moonves, CBS’s chief executive officer, said today in San Francisco at a conference hosted by Morgan Stanley. “It’s a dual-revenue stream and the advertising part of the equation will continue to grow.”
CBS’s move will introduce dynamic advertising to more marketers, said Marc DeBevoise, executive vice president and general manager of entertainment, sports and news for CBS Interactive.
The network enlisted Canoe Ventures LLC, a company formed by cable operators including Comcast and Time Warner Cable Inc., to develop a system that allows commercials to be added or removed from shows like they are online. CBS’s first dynamic ads will appear on Comcast and Time Warner Cable Inc. systems in a few weeks, followed shortly by Cox Communications Inc. and Bright House Networks LLC, Ross said.
“Our clients have been asking for this,” Ross said. “Some clients want to take advantage of being able to update or change their messaging.”
Viewers who watch on demand are younger and more affluent than average, DeBevoise said. As VOD users, they’re valuable to advertisers because they’re more engaged, Ross said. Plus, VOD systems disable fast forward, preventing them from skipping commercials. Until now, commercials seen after three days haven’t produced revenue for TV networks.
“The Good Wife” and “The Big Bang Theory” are CBS’s two most popular shows for on-demand viewing, the network said.
CBS is introducing the new service ahead of the annual meetings that TV networks hold in May with their biggest advertisers to showcase new programs and set rates for the next television season.
“This will definitely be part of those conversations,” Ross said.
Most CBS shows are available on demand for 35 days after they first air, potentially giving the network an extra month to sell ads for every episode, DeBevoise said. CBS is using data from Canoe and Rentrak Corp. to show clients how many times their commercials are seen, he said.
Dynamic advertising produced about $150 million in revenue last year, Seth Haberman, chief executive officer of the New York-based marketing firm Visible World, said in an interview in September. That will double annually for the next three years, exceeding $1 billion in 2016, he estimated.
Even with that growth, the sum is tiny compared with the $73 billion that SNL Kagan said was spent on U.S. TV ads in 2013.
CBS, controlled by Chairman Sumner Redstone, gained 2.2 percent to $67.42 in New York. The stock has increased 5.8 percent this year.
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