In face of cord-cutting, broadcaster is building a new business for the digital age
Even a Vulcan would appreciate the logic of CBS’ “Star Trek” play.
The company announced this week that it will premiere a new “Star Trek” series on CBS All Access, the $6-a-month subscription streaming service that it introduced last year — and which, until now, has served solely as a delivery mechanism for library content such as “Cheers” and “I Love Lucy.” The move was a big enough deal for CEO Leslie Moonves to spend much of his third-quarter earnings conference call Tuesday talking about it, likening “Star Trek” at one point to “the family jewels.”
That CBS would stream “Star Trek” on All Access rather than air it on broadcast proves that the company is serious about a product, that has been the butt of a few jokes. (“Getting ‘NCIS’ for free over the air has always felt like stealing,” the Onion wrote last year.) More importantly, it proves that CBS understands more than other broadcasters that its business model must evolve — and do so at warp speed.
“I think ‘Star Trek’ is the type of show that could bolster CBS All Access and put it on perhaps the same footing as Netflix or Amazon,” Brad Adgate, senior vice president of research at Horizon Media, told TheWrap.
That would be a significant achievement for a company whose foundation is showing signs of age.
Linear broadcast television has, for more than six decades, been as solid a business model as there is. CBS and the other broadcast networks are allowed a government-controlled monopoly, selling ads on the back of public airwaves in exchange for nothing, save some regulatory compliance.
The rise of cable in the ’80s ate into the broadcasters’ business, but it also gave them new revenue streams. Cable providers send local affiliates retransmission fees in exchange for carrying the stations’ signals alongside cable networks. CBS has, in recent years, demanded bigger and bigger cuts of those fees, even severing ties with local stations who refuse to fork over the extra cash.
But cord-cutting and the emergence of a generation of viewers coming of age without cable subscriptions have threatened the current ecosystem. On linear television, live-plus-same day ratings continue to decline. Moonves on Tuesday touted Nielsen’s recent move toward measuring digital viewing alongside television viewing and the pending merger of Rentrak and Comscore, both signs that digital viewership is growing in importance as television viewership wanes. And cord-cutting fears sent media stock prices plummeting earlier this year.
“I think there’s no question that there’s going to be a change from the 180 channel universe,” Moonves said Tuesday. He also called predictions that cord-cutting would decimate the media landscape “overblown,” then in the same breath described how well positioned CBS would be to survive said decimation.
CBS, Moonves said, will receive more money per subscriber from so-called “skinny bundles,” in which viewers subscribe to small numbers of channelse delivered to them over broadband. He pointed to All Access and Showtime’s stand-alone streaming service, launched earlier this year with Hulu, as options for a future in which increasing numbers of viewers want to choose their networks a la carte.
CBS has, at times, been bolder than its competitors when it comes to digital experimentation. Its strategy for licensing summer event dramas to services such as Netflix and Amazon within unusually short windows of time after initial broadcast kept those shows profitable even when the ratings scraped bottom.
But what CBS is engaged in now is rocket science by comparison. CBS is the only broadcast company to launch its own paid subscription-video on demand service. Now it is taking a show that would be a near-sure thing on broadcast and placing it instead on a platform that, until yesterday, most of the company’s customers probably didn’t know existed.
What is CBS giving up by doing this? Just look to “Supergirl,” a freshman drama based on another legacy science fiction franchise, which two weeks into its run is the highest rated new show of the fall season. If CBS can do that with a property whose last major onscreen incarnation was a notorious ’80s feature film flop, imagine what it could do with “Star Trek” on broadcast.
But the long-term payoff of a streaming “Star Trek” is bigger — if CBS can build a business around it. Moonves clearly believes he can. On Tuesday he even teased the introduction of an ad-free All Access option for $9.99 a month. That’s the same price that Netflix charges for its standard streaming subscription and that YouTube chose as the cost of its new YouTube Red service.
“[‘Star Trek’ fans] are some of the most passionate fans in the world, and we can see millions of them joining All Access,” Moonves said Tuesday. Perhaps. But a lot of those fans, regardless of how many of them are willing to pay, would no doubt rather watch the new show for free — or at least on some bundle or service that they already subscribe to. CBS is willing to risk their ire if, in the end, enough of them hand over their credit card numbers.
It’s a tough tactic. But if it works, those begrudging fans (and their money) could be the foundation on which CBS builds its next few decades.