CBS, the Survivor
(IDG) -- Call it revenge of the tortoise. In the late 1990s, three of the four big American TV networks raced to pour hundreds of millions of dollars into Internet investments. ABC, NBC and Fox created expensive online operations, stocked them with top executive talent and got ready to cash in on the media revolution.
CBS, a unit of Viacom, hung back. And the Tiffany network had to listen to just about everyone jeer that it was clueless, had no Web strategy and -- most damning of all -- didn't even have an entry in the contest to build a robust Internet portal. "It was like being out at the Hamptons without a Beemer," says Leslie Moonves, CBS' chief executive. "It got so that I had a very bad case of portal envy."
But by keeping its head down, CBS looks prescient. Moonves, who took the reins of CBS' in-house Internet operations last month, expects CBS.com and its embryonic interactive TV ventures to be profitable by the end of the year. If that happens, they will most likely be modest earnings on slim revenues -- about $25 million (out of about $4 billion for the whole network). But as CBS brass are now eager to trumpet, that's a lot better than the mounting losses of the other networks.
And those losses are big. In 1999, General Electric's NBC embarked on a massive joint venture that led to would-be Yahoo-killer NBCi.com, a separate, publicly traded company. News Corp.'s Rupert Murdoch created a new division, News Digital Media, and invested millions in sites married to Fox-related channels. And Disney, which owns ABC, spun off its Go Network portal into a separate unit with its own tracking stock.
Fast-forward two years and little remains of those ambitious ventures. Swept up in the market frenzy, the networks paid dearly for their excesses. NBCi, the only publicly traded media Internet company left, has laid off more than 320 of its 800 employees. The stock trades at about $2, down from a Jan. 17, 2000, high of $100.17. In January, Disney chief Michael Eisner gave up on Go, laying off 400 staffers and taking a $790 million charge on operations. And this winter News Corp. rolled its News Digital Media sites back into their respective broadcast properties. Chairman Murdoch has taken pains to minimize the Internet as a component of his operations: "We have slowed down and are slowing down," he said in November. "We have been very tentative and careful. In retrospect, we would have liked to have been even more so."
So how did the CBS tortoise plod ahead of all those exuberant TV network hares? By tying its online efforts to what it knows best -- TV programming. In other words, CBS' online effort is the sum of its parts. Rather than start with a big, amorphous portal, it focused on its TV lineup and created Web sites for its most popular shows. Talk about perfect timing. In February, CBS captured its first sweeps victory since 1998. Buoyed by a blockbuster Thursday evening lineup that includes Survivor and crime-drama CSI, the network averaged 13.7 million viewers per prime-time minute during the month. It also tied ABC in the 18 to 49 age group -- the coveted viewers that CBS has been losing for years.
The network has converted that success into traffic at companion Web sites closely integrated with their television counterparts, which in turn flog the Web properties. The launch of the new Survivor in January drew about 125,000 unique visitors, up from almost zero the week prior, according to Nielsen NetRatings. On Super Bowl Sunday and the day after, traffic to CBS.com soared 201.5 percent to 858,000 unique visitors. CBS Sportsline.com also saw an increase of 84.5 percent to 1.1 million, according to Jupiter Media Metrix. The network is building new sites for CSI, 60 Minutes II and the comedy The King of Queens. "You watch TV, then you go online," says Moonves. "It fits." These companion sites don't draw the total traffic that, say, NBCi hauls in, but they are far less expensive to operate.
This year, Moonves says, CBS plans to stay the slow-and-steady course while it launches interactive TV projects around shows like CSI and NCAA basketball, which already has a spot on Microsoft's WebTV menu. CBS spokesman Dana McClintock says the costs for developing interactive TV content will be borne by various unnamed technology sponsors, not by CBS. The network also plans to continue to promote its Web sites tied to event-based programming like the Grammy Awards and the Super Bowl, both of which sent surfers jamming the servers of the network and its corporate cousins.
Not all that CBS touched has turned to gold, however. It invested in more than a dozen Web properties, trading on-air advertising and promotion for ownership stakes. Most of these are struggling, and several have flopped. StoreRunner.com and Women's Consumer Network are among the market disasters. Even its flagship CBS MarketWatch.com and CBS HealthWatch.com investments, though surviving, have lost much of their value. Still, CBS kept its investments small -- most of the sites' promotion aired during regular programming or in unsold late-night commercial slots. And the network continues to bet that a few properties will emerge as profitable enterprises. That might take a while, but CBS doesn't seem to be in any hurry.
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