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Now you can stream TV shows with ads over the Net the day after they air. For free. It's a win-win situation for fans and networks alike

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Television's most arresting dramas exist in a high-speed world where plot twists abound, chaos reigns, and story lines can change in an instant. The problem for fans is that they, too, live in a hectic world that doesn't stop for prime-time television. Luckily for fans, they also live in a world of high-speed Internet.

This season, some of prime time's most popular shows have moved online. Major networks CBS (CBS), NBC, ABC (DIS), and Fox (NWS) are each allowing users to stream key shows in their fall lineups over the Internet for free.

In most cases, the ad-supported shows are available the day after the initial television air date and stay online for weeks. TV executives say the action is good for both broadband users and the studios, allowing existing viewers to catch up on missed shows while providing another outlet for the studios to market their television content and serve ads.

The move online underscores how major media companies have become more comfortable with releasing their content to Internet audiences. In the past, studios have been cautious about putting content online because of concerns that it would lead to piracy or cannibalize the television audience. NBC, for example, threatened legal action against YouTube after clips of its shows appeared on the site. NBC subsequently became the first network to freely offer clips of its shows on YouTube. On Oct. 9, prior to announcing its agreement to be acquired by Google (GOOG), YouTube struck a deal with CBS to post clips of its shows on the site (see BusinessWeek.com, 10/9/06, "YouTube's New Deep Pockets").

CATCHING UP. Albert Cheng, executive vice-president of digital media at Disney/ABC Television Group, says studios view digital platforms as complementing television rather than cannibalizing TV's audience. "We don't see it as viewers are watching online and not on TV," says Cheng. "Television is still where they want to watch the programming. These digital platforms allow for more people to catch up with their shows."

ABC first tested the idea of showing full episodes during May sweeps. More than 5.7 million episodes of Lost, Desperate Housewives, Commander in Chief, and Alias were clicked on. According to market research commissioned by ABC, most users tuned in online because they missed the TV episode. About two-thirds watched complete episodes.

ABC also found that 87% of viewers could recall the advertisers whose commercials were inserted before and between acts. Typically online shows on ABC and other networks have four to six advertisements. That's far fewer ads online than the number that appear during commercial breaks on television. However, unlike recorded television shows, these ads cannot be fast-forwarded or skipped.

Advertisers are getting jazzed about putting their ads online. The market for ads with online TV shows is expected to skyrocket to $1.5 billion by 2009. That's up from $385 million this year, according to estimates from research firm eMarketer.

MYSPACE TV. The money that will flow into online ads for TV is enticing more television studios to overcome fears of piracy and lost TV audiences. On Oct. 3, Fox began offering episodes of its hot shows, including Prison Break and Bones, via a "Fox on Demand" channel on MySpace. Both are owned by News Corp. (NWS).

The impetus was, at least in part, to keep audiences of Fox's fall lineup engaged while it aired Major League Baseball during its prime-time slots. However Mickie Rosen, senior vice-president and general manager of entertainment for Fox Interactive Media, says the network also sees online as an opportunity to win new audiences. "I think the beauty of this is that it is not only a way for current fans that might have missed an episode to catch up," says Rosen. "It is also a way for folks that don't watch the shows to discover them."

Indeed, online is attractive to studios because it allows them to do two things at once—sell advertising and market their shows to new viewers. In addition to streaming its video on MySpace, for example, Fox also has separate social networking pages for shows, where people can learn more about characters and become part of a community built around the show. MySpace offers other content providers similar advertising space, and Rosen says MySpace is looking to stream shows from other networks, not just sister company Fox.

BIG SCREEN ADVANTAGE. A potential drawback for studios that opt to show more content online is that online ads are much cheaper than television commercials. A 30-second prime-time slot on a major network can cost more than half a million dollars. The cost of advertising online varies, depending on the network traffic and whether the advertiser is paying based on impression, click, or action, among other things. However, many video ad sellers charge between $25 to $40 per 1,000 plays, according to Adweek.com.

Many studios would lose money if their television audience became an online-only audience. To date, that has not been a problem because consumers still want to watch their movies on big-screen TVs, and hooking up computers to televisions often involves the hassle of cables, which can compromise picture quality. However as technology advances to bring computer content from the really small screen to the bigger screen, television executives know that the demand for online content will grow.

Dana McClintock, a spokesman for CBS, says that his network is prepared for just such a future. "I don't like to get into the crystal ball game but one could see a scenario where more people are watching online than on television," says McClintock. "But that's fine with us."

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