The network will sell advertising separately for the on-demand programs, which include "CSI: Crime Scene Investigation," "CSI: Miami," "CSI: NY," "Survivor," "NCIS," "Numb3rs," "Jericho" and "Big Brother." Last November, when CBS began offering shows through Comcast VOD, the network kept national advertising embedded in the programs but still charged 99 cents for each episode.
But free VOD has long been the goal of Brian Roberts, CEO of Comcast, who sees it as a key marketing tool that differentiates cable from its satellite competition. According to one executive familiar with this most recent deal, Comcast persuaded CBS to agree to the free deal by offering a revenue guarantee. The two parties will split ad revenue, but even if CBS never sells an ad, it will still get a guaranteed sum from Comcast.
Ads should be easy to sell
However, there's little reason to believe CBS wouldn't be able to sell ads around it. Many cable networks, which have experience using ads to support their free VOD programming, reported selling out of such inventory in the upfront. And CBS has already seen how successful a free ad-supported streaming model can be with its college basketball March Madness on Demand, which generated $4 million to $5 million in incremental revenue for the network.
The ad breaks, a CBS spokesman said, are similar to what CBS runs on Innertube, its broadband network. Unlike Intertube, however, VOD has full VCR-like functionality, which means consumers can fast forward, pause and rewind.
The bulk of consumer research indicates most viewers would rather watch a free or less expensive show that's subsidized by advertising than pay a premium for ad-free content. A study early this year from Horowitz and Points North Group indicated consumers, by a three-to-one margin, prefer free, ad-supported on-demand TV programs vs. paying $1.99 for programs.