Investor's Business Daily, March 8th, 2007
CBS is becoming a veteran player in the game of online video.
For the second straight year the TV network won't ask people to pay a fee to watch live games from the National Collegiate Athletic Association's men's Division 1 basketball tournament on the Internet.
CBS CBS will make all its revenue online by selling TV-like video ads.
CBS is among the companies, including Internet leaders such as Google GOOG, Yahoo YHOO, trying to find the right formula to make a buck off online video.
Offering live video to the Internet is a learning process, but the March Madness basketball tournament is starting to pay off for the company, says Stephen Snyder, chief operating officer for CBS Interactive, the broadcaster's online unit.
"Last year was a big step for everybody," he said. "(This year) our revenues (will be) more than double and the bottom-line profits are going up about six times."
CBS, which owns all the broadcast rights --TV, radio, Internet -- to the tournament, won't say how much it's making from airing the games online. But interest among advertisers is high, Snyder says.
"Last year, we had 20 or 21 online advertisers for the tournament, and this year we have bulked up to include more than 30," he said.
CBS is selling blocks of 15- and 30-second spots for TV-like video ads that run during the games.
Ad rates are up from last year, says Snyder, though he wouldn't give the rates. The Associated Press has reported that CBS got about $4 million from online ads that ran with last year's tournament Webcasts.
Analysts say video ad rates are higher than any other type of online ad. Advertisers are paying around $25 to $35 each time their video ad is seen 1,000 times.
It's likely online advertisers are paying a premium to reach a target audience, says Phil Leigh, president of research firm Inside Digital Media. "The percentage of consumers that want this kind of content is pretty high," he said. "That means they're willing to sit through a 15-second ad to see a game."
Also, the games attract young viewers coveted by many advertisers. And since it's free, that makes it even more attractive to advertisers, says Jonathan Hurd, a director for Altman Vilandrie & Co., a technology and media consulting firm.
"The NCAA tournament has pretty broad appeal," he said. "It's a valuable audience, so they are able to charge higher rates as a result."
CBS lets fans watch up to 56 of the 64 tournament games online. The action starts Tuesday and ends April 2. Online viewers will not be able to see any game that is televised in their local market.
Of course, a college's fans are often scattered countrywide and worldwide. Many fans have come to rely on the Webcasts, Leigh says.
"For people who are really into the tournament, the Internet is (often) the only way to see your favorite team," he said.
Total online video ad sales are expected to rise to $1.3 billion in 2011 from just $300 million in 2005, says Jupiter Research. But in a January conference call with analysts, Google Chief Executive Eric Schmidt questioned the effectiveness of 15-second or 30-second "pre-roll," ads that run before programs start.
On Tuesday, Schmidt cautioned investors at a Bear Stearns conference in New York City not to expect much in the way of revenue from YouTube, the most-visited online video site. Google bought YouTube in November for $1.65 billion.
CBS, though, expects big boosts in revenue and profit from airing the tournament online, and that's a sign of more to come online, CBS CEO Leslie Moonves told analysts on a conference call late last month.
"It's a trend we expect to continue as the medium grows," he said.
Last year, CBS let viewers register ahead of time for the tournament. In exchange for providing basic information, they get VIP passes to guarantee access to the games.
CBS issued 265,000 VIP passes last year and might double that this year, Snyder says.
CBS expanded its Internet pipe this year and brought in Akamai Technologies AKAM to help handle the demand. "You have to manage your traffic so you don't take your site down," Snyder said.
Copyright 2007 Investor's Business Daily, Inc.
