Free TV: Stream it and they will come
CBS' online March Madness on Demand was a huge success. Are more free online TV offerings on the way?
By Paul R. La Monica, CNNMoney.com senior writer

NEW YORK (CNNMoney.com) Online video has arrived in a big way.

CBS' March Madness on Demand offering, live streams of games from the NCAA college basketball tournament, has proved beyond the shadow of a doubt that people are willing to go on to the Web to view live entertainment.

CBS streamed more than 15 million live broadcasts of NCAA tournament games during this year's March Madness, numbers that exceeded the network's expectations.
CBS streamed more than 15 million live broadcasts of NCAA tournament games during this year's March Madness, numbers that exceeded the network's expectations.
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According to figures from CBS SportsLine, the online sports news site of CBS, more than 1.3 million people signed up for the free service. These users visited the on-demand site about 5 million times during the first three weeks of the NCAA tournament and watched over 15 million live video streams.

By way of comparison, CBS SportsLine said that it had only between 20,000 and 25,000 users for a similar product during last year's tournament, when it charged $19.99.

Larry Kramer, president of CBS Digital Media, said viewership far exceeded expectations, which likely made the advertisers quite happy. Sponsors of the online coverage included Dell, Lowe's, General Motors and Marriott.

"We obviously were fairly conservative in how we sold it and were really pleased with it. Clearly our advertisers got a bonus," said Kramer, adding that March Madness on Demand was a profitable venture for CBS (Research).

CBS's Internet slam dunk comes on the heels of last year's successful video and audio Web casts of the Live8 charity concerts by AOL, the online portal owned by Time Warner (Research). (Time Warner also owns CNNMoney.com.)

AOL also recently launched a site called In2TV, which offers free streams of old TV shows from the Warner Bros. library, including "Maverick," "Welcome Back Kotter," and "Wonder Woman."

The price of being free

So this raises the question: Should media firms put more content online -- albeit with advertising embedded in the streams -- for free? Or will consumers be willing to pay to download shows so they don't have to sit through commercials?

Of course, several media firms have had success selling downloads of their shows through services like Apple's (Research) iTunes and Google's (Research) new video store. But some TV experts think consumers may eventually balk at paying to download their favorite shows.

"My gut tells me that the consumer is pretty set on an Internet model that isn't built on pay per use," said Charles Merzbacher, chairman of the department of film and television of Boston University. "When it's free, people find it and they gravitate toward it. The overwhelming success of everything on the Internet has all been about what's for free."

Dennis McAlpine, an independent media analyst, agrees that despite all the talk about people using TiVo (Research) and other digital video recorders to fast forward past commercials, he thinks most TV watchers would rather sit through an online ad during a video stream if it means they could watch shows for free.

"People have been so accustomed to watching advertising in the middle of a program. They'll accept that as opposed to paying for something," said McAlpine.

Along those lines, Kramer said that as long as there is enough demand to watch something online, advertisers will be interested.

So even though CBS is currently charging fees to download some of its top shows -- such as "Survivor" and "NCIS" -- through Google, Kramer didn't rule out eventually offering streaming telecasts of prime-time episodes for free with advertising.

"What advertisers want is a large enough audience to matter. We're going to test various things in the coming months and we definitely believe there is room for an ad-supported model online," Kramer said.

In fact, CBS has announced two more deals recently in which it is offering content for free. This week, CBS SportsLine will allow people to watch live action from the 11th, 12th and 13th holes at The Masters golf tournament.

And last month, CBS said that beginning with next fall's TV season, it will offer expanded footage from its long-running news show "60 Minutes" through a special "microsite" on Yahoo! (Research)

TV through iTunes isn't going away

Still, others say that there is room for both free and pay-per-download offerings for online video.

"I don't think one will preclude the other. There isn't one business strategy that works," said Mark Fratrik, vice president with BIAfn, a financial and strategic consulting firm for the media and communications industries. "Some programs are so distinctive that people will want to download them and view them on an iPod."

But McAlpine is not convinced. He adds that for now, one reason why people may be willing to pay to download shows is because they can transfer them to portable devices like Apple's iPod. But he wonders how long this fascination will last.

"I can't imagine how you can watch shows on a 2 and a half inch screen and get much from it. I think it could be more of a novelty factor," McAlpine said.

Either way, Fratrik said that the increased popularity of using the Web to view video online should be a welcome boon for media companies, who have had to grapple with the fact that advertisers are increasingly finding that traditional 30-second commercials are becoming less effective.

He added that the media companies have nothing to lose by charging fees for some shows since any incremental revenue would be welcome.

"Some types of programming are not going to attract enough audiences to lure advertisers so selling on a subscription basis is not wrong," said Fratrik. "The fact is, broadcasters overall will have more opportunities for additional revenue."

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The reporter of this story owns shares of Time Warner through his company's 401(k) plan. Top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.