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Network TV Feels Effects of On-Demand Technology

MICHELE NORRIS, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Michele Norris.

MELISSA BLOCK, host:

And I'm Melissa Block.

This week two major television networks announced what could turn out to be historic changes in the way people watch their favorite shows. CBS and NBC said they will make some of their most popular programs available on demand for a small fee. Last month ABC said it would allow viewers to download certain programs to their video iPods. As NPR's Jim Zarroli reports, the networks are being forced to make peace with some of the new technologies that are reshaping the TV industry.

JIM ZARROLI reporting:

Throughout their history the major broadcast networks have had a pact with the public. Viewers could watch their programs free if they were willing to sit through the commercials. It's a bargain that's been under assault for years with the growth of cable and pay TV and the VCR. With yesterday's announcements by CBS and NBC, the old model may have cracked open for good.

Mr. JOSH BERNOFF (Analyst, Forrester Research): It's a complete shift in the way networks are looking at television.

ZARROLI: Josh Bernoff is an analyst at Forrester Research. He says the decision by CBS and NBC to offer programs on demand will render the whole idea of a TV schedule obsolete.

Mr. BERNOFF: Instead of requiring people to watch the programs at the time that they're broadcast, they're now expanding their distribution into the Internet, onto digital video recorder hard drives and, especially importantly with Comcast and CBS, you'll now be able to watch popular shows on cable video on demand.

ZARROLI: The services announced yesterday will start small. For instance, CBS programs will be available only to Comcast customers in markets served by a network-owned station. But viewers in those areas will be able to purchase some of CBS' most popular programs, including "Survivor" and "CSI."

(Soundbite of "CSI")

Unidentified Man #1: ...no gunshot wounds, no stab marks, no signs of strangulation.

Unidentified Man #2: A long way out in the sticks just to drop dead.

ZARROLI: NBC Universal programs will be available to DirecTV satellite customers. They will have access to hit cable shows like "Monk," as well as network programs like "Law & Order: SVU." But the networks make clear that if the on-demand services prove popular, they're willing to expand them to other programs and markets. In fact, network officials acknowledged that the new service is something of a gamble. They say they have no idea how popular on-demand TV programs will be. Bill Carroll is vice president of the Katz Television Group, a media buying firm.

Mr. BILL CARROLL (Vice President, Katz Television Group): I don't think, at this point, they really know or anyone really knows what the ultimate upside potential is. I think many would say that people would not be--viewers would not be willing to pay to watch television that they can get over the air.

ZARROLI: But services like TiVo, which allows viewers to watch recorded programs and skip over the commercials, are threatening the networks' traditional way of making money, and that's forcing them to come up with new business models. Martin Franks is executive vice president of CBS Television.

Mr. MARTIN FRANKS (Vice President, CBS Television): CBS is firmly on record as being willing to go back to a three-channel universe, but that hasn't been the case for a good long while. And as these technological options explode, we have to be nimble, on the one hand, to take advantage of them and still thoughtful so as not to cannibalize our existing business.

ZARROLI: In fact, the new services contain potential risks for the networks. NBC Universal is offering its programs commercial-free. CBS will include ads but concedes that viewers can fast forward through them. If viewers are no longer watching commercials, advertisers will have little incentive to buy time on a network. The challenge for the networks will be to make money off new technology while protecting their old revenues as much as possible. Jim Zarroli, NPR News, New York. Transcript provided by NPR, Copyright NPR.

Jim Zarroli is an NPR correspondent based in New York. He covers economics and business news.