The advent of digital distribution platforms for television content has created a new challenge in the relationship between studios that create series and the broadcast networks that distribute them. But so far, both sides see the need to cooperate as they figure out exactly what the impact will be as viewers start watching more TV on the Internet, cellphones and iPods.
There are two digital content businesses, according to Mark Lazarus, the president of Turner Entertainment Group. One is streaming programming over broadband, which creates new opportunities for viewers; the other is the download-to-own business, which he sees as an extension of the current home video business.
“It’s just making the home video business more accessible to the consumer,” Mr. Lazarus said. “They’ve always had the ability to call in and buy the DVD set or go to Wal-Mart and buy the DVD set. This just really brings the home video business into the home and allows you to have more simple access to that content to purchase.”
But coming up with models that work for both studios and networks has been a process. Networks were quick to offer shows on digital platforms for a fee or with advertising when the product in question came from their own sister studio, but the process of providing programming from an outside studio took more time to develop.
In September, Warner Bros. Television Group, one of the largest prime-time network suppliers, made a one-year deal with its new NBC drama “Studio 60 on the Sunset Strip” that allows the network to keep revenues it raises through streaming episodes on NBC or third-party Web sites. In turn, Warner Bros. keeps the revenues from permanent downloads on Web sites including iTunes and Amazon.com after the “Studio 60” episodes air on NBC. Warner Bros. made a similar deal with ABC for the drama “The Nine.”
Calling the deal “an experiment” that will allow both sides to collect data on how viewers want to stream or download TV programming, Touchstone Television President Mark Pedowitz said it is an inevitable move toward a better understanding of how digital platforms may impact the business.
“It’s a new world, new media, and no one is quite sure what it means, but everyone is very aware an evolutionary step needs to be taken,” Mr. Pedowitz said.
The Warner Bros. deals with NBC and ABC are just one solution, Mr. Pedowitz said, noting that the deals mimic the revenue splits the studios and networks currently share on TV shows.
“The ad revenue streaming stays with the network, and the download/DVD fee stays with the studio,” he said. But, he added, “Other networks will find other ways and other templates to find out what works and what doesn’t work.”
Jon Lafayette contributed to this report.