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Big media gets retro
NBC and AOL are betting that people will want to watch "classic" TV shows online. Are they right?
December 20, 2005: 12:25 PM EST
By Paul R. La Monica, CNNMoney.com senior writer
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NEW YORK (CNNMoney.com) - Media companies are going old school.

NBC Universal announced earlier this month that it was making downloads of several of its "classic" TV shows, including "Dragnet," "Alfred Hitchcock Presents" and "Knight Rider," available for purchase on Apple's popular iTunes store.

And last month, AOL disclosed plans to launch an online service called In2Tv. This site will feature episodes of many shows from the Warner Bros. library, including "F Troop," "Maverick" and "Eight is Enough." (AOL and Warner Bros. are both owned by Time Warner (Research), which also owns CNNMoney.com.)

Users won't have to pay to watch the episodes however. Instead, they will just have to watch some commercials. Viewers also will only be able to watch streamed content online as opposed to being able to save a show to a computer or onto a portable device. In2TV is scheduled to launch next month.

Know your audience?

If these services are a success, it could open up a lucrative new revenue stream for media companies.

But some analysts are skeptical.

This is, after all, the era of the humongous flat-screen TV and some analysts wonder if people really would want to watch an old TV show on a relatively tiny screen.

"There is a lot of interest in classic television as we've seen through the DVD market and the success of Nick at Nite and TVLand," said Ed Martin, programming editor of MediaVillage.com, an independent television industry research site. "But whether or not people are going to want to watch them in other formats is another matter."

Others question if media companies are going after the right demographic.

Analysts were particularly puzzled by NBC's decision to offer some of its older shows on iTunes, arguing that people who are hip enough (i.e. young) to own a video iPod probably are not interested in paying to watch old reruns.

NBC has made episodes of current shows such as "The Office," "Law & Order," and "Surface" available on iTunes as well though.

"There is a big difference between what AOL is doing -- which is free and ad supported -- and expecting people to be motivated to pay for something," said Todd Chanko, an analyst with Jupiter Research. "It's the totally wrong audience too. For those people who do own video iPods, they are not likely to have even heard of 'Dragnet' or 'Adam-12.'"

But Amy Gardner, a spokeswoman for iTunes, said that Apple (Research) was pleased so far with the sales of some of the older NBC shows, pointing out that a couple of the "Alfred Hitchcock Presents" episodes are currently among the store's top 100 video downloads.

Little risk, big advertising rewards

And some say that for the TV studios, making old content available online is a no-lose situation. There doesn't need to be huge demand for the shows to justify a return, given the relatively low expense of digitizing old video.

"With a lot of classic programming, it's not airing anywhere. It's just collecting digital dust," said Michael Goodman, a senior digital entertainment analyst with Yankee Group. "Anything the studios make is gravy."

Analysts said the big entertainment companies shouldn't have to spend much on promotional efforts either.

"The Web will become a testing ground for older library content," said Chanko. "Older content is desirable because you don't have to build up marketing for it. It's still part of the cultural zeitgeist."

But most analysts said that the In2TV model of offering free shows accompanied by advertising is likely to be more successful than a pay-per-download model.

"The back catalog belongs as an ad-supported service. The studios can make a lot more money that way," said Goodman. "How many people are going to pay $1.99 for an episode of 'Welcome Back Kotter?'"

Even if In2TV doesn't attract massive traffic, some think the site will generate significant interest among advertisers because In2TV should be able to promise advertisers a targeted niche audience.

"Ultimately, contextual ads will be the way to make most money. I'm old enough to remember when 'Maverick' was a popular program so companies will hit me with ads germane to my demographic," said Phil Leigh, president of Inside Digital Media, an independent research firm.

What's more, there will be a greater scarcity factor for ad inventory since In2TV is promising that there will be only two minutes of commercials during a thirty-minute episode, as opposed to the typical eight minutes of commercials on prime-time television.

Still, it is uncertain if the studios can bank on nostalgia and kitsch for the long-term. The novelty of being able to watch old episodes of "Wonder Woman" may wear off quickly.

"Once an initial group of fans who want to see a particular show and have not been able to do so tap into online viewing and get their fill, can this continue to be a viable business model?" said Martin. "I can see this generating a lot of interest up front but I'm not sure if there is any longevity."

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