CBS at 87 Plunges Into Web-TV With Sony, 24-Hour News

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CBS Corp., the 87-year-old broadcaster, is embracing online television with the gusto of a tween.

Today, the company started a 24-hour online news channel, CBSN. Yesterday, Chief Executive Officer Leslie Moonves said he’ll supply Sony Corp. with programs for a Web-only TV service. And last month CBS All Access made its debut, offering the most-watched television network online for $5.99 a month.

With these moves, Moonves has leapfrogged his peers, going straight to consumers to make virtually all of CBS’s programs available on the Web at the same time as they are on TV. The company wants to deliver news and hit series like “NCIS” to the growing market of young people who watch video on phones and tablets, without undermining the $104 billion TV industry.

“We’re expanding our reach to new audiences, especially younger viewers, and proactively taking advantage of the growing mobile marketplace,” Moonves said on a conference call yesterday, after reporting third-quarter results that beat analysts’ estimates. “Going mobile can help television networks continue to grow.”

The audience for television is growing old. The median-age viewer for the four broadcast networks rose to 55.4 years from 50.6 over the past five years, according to David Poltrack, CBS’s head of research. Video-on-demand viewers are eight years younger, and earn $18,000 a year more than linear viewers.

Hulu LLC, owned by Walt Disney Co., 21st Century Fox Inc. and Comcast Corp.’s NBCUniversal, was created in 2007 to address this shift, offering a wide range of shows over the Internet shortly after episodes aired.

Higher Fees

The pressure on networks has increased as advertisers spend more online, and Netflix Inc. and Amazon.com Inc. entice viewers to binge-watch shows like “House of Cards” and “Transparent.”

About 15 million U.S. TV households don’t subscribe to pay television. Programmers like CBS, NBC and Fox have to figure out how to attract those viewers independently without tempting cable and satellite customers to drop their subscriptions.

“This is just a new way of getting paid and reaching consumers who are not part of the ecosystem,” Moonves said today in an interview with Bloomberg Television.

CBS, founded in 1927 by William Paley, was dependent on advertising for 70 percent of its revenue several years ago. It has raced to increase fees from local TV stations, pay-TV services, and selling shows online -- on its own or through outlets like Amazon and Netflix. In the third quarter, advertising made up less than 50 percent of CBS’s overall revenue for the first time, the company said.

‘Leaving Station’

CBS fell 0.7 percent to $52.13 at the close in New York. The shares have declined 18 percent this year.

Showtime, like Time Warner Inc.’s HBO, will be available without a pay-TV subscription by next year, CBS said yesterday.

“The train is leaving the station,” David Bank, an analyst with RBC Capital Markets, said in a phone interview. “There’s a clear demand for popular, monetizable media on non-core distribution platforms.”

Viacom Inc., which like CBS is controlled by 91-year-old billionaire Sumner Redstone, has also said it will sell shows to Sony.

Warner Bros. has created a division to focus on digital shorts, Blue Ribbon Content, with original concepts and shows from DC Comics, and a virtual-reality trip through the Bat Cave. Rupert Murdoch’s Fox said this week it is considering Web-based initiatives.

Online First

“I would not be surprised in the next one or two years to see networks release a show on-demand before it airs,” Ted Sarandos, Netflix’s chief content officer, said at a conference yesterday in Los Angeles.

The emergence of so many ways to watch television has exacerbated conflicts between media companies and distributors over the value of shows. A standalone HBO product risks cannibalizing pay-TV subscriptions, Stephen Burke, CEO of Comcast Corp.’s NBCUniversal, said last month.

Dish Network Corp. has blacked out Time Warner’s CNN and Cartoon Network in a contract dispute and may permanently drop some of that company’s Turner cable networks.

“The industry is changing in a sense, because of the different methods of getting content today,” Dish Chairman Charlie Ergen said this week. “I don’t anticipate that the cable companies, satellite companies, and phone companies are all going to carry the same 10 groups like it is.”

Incremental Viewers

By going directly online with the CBSN news network, Moonves saves money building a new property and keeps it out of the fee disputes that routinely black out channels to consumers. With Sony, he said he’ll get higher fees than from other pay-TV services.

Reaching the people who watch popular online shows from Vice or PewDiePie may not be Moonves’ goal, given the age of his average viewer and the company’s relatively staid programming.

“There is an incremental market they are missing out on they are trying to capture,” Bank said. “They just want to pick up what they are not getting.”