Networks and the 'Net

The major media conglomerates have used the Internet to expand the monetization potential of their intellectual properties for a while now. Posting clips on video-sharing sites, promoting movies via social networking centers such as MySpace, and streaming television shows for broadband users are now acceptable means of chasing both incremental revenues and marketing opportunities. A new study confirms that the Web does indeed seem to be the place to go to reach some valuable demographics.

According to an article out on Reuters, Nielsen Analytics and Scarborough Research conducted a study to gauge the characteristics of the demographic that uses the Internet to view television shows. The findings were pretty interesting -- the data displays a demo that tends to be younger, have more education, and possess a higher amount of monetary wealth than the viewers who access entertainment over the networks themselves. Perhaps the most compelling comment is the one regarding the effect of Internet broadcasts on the ratings value of traditional broadcasts -- no significant cannibalization has been observed. In fact, it was discovered that total TV viewing hit an all-time record in the United States last season.

This information has to be exciting for Disney's (NYSE: DIS  ) ABC, General Electric's (NYSE: GE  ) NBC, CBS (NYSE: CBS  ) , and News Corp.'s (NYSE: NWS  ) Fox. Advertising is a huge industry; its overall annual revenue base is valued at $70 billion. More than ever, corporate America wants to target its collective ad budgets in the most efficient way conceivable; utilization of the right platform is key to producing an acceptable return on investment (generating ratings for ads will also help determine the efficacy of a campaign). Combining a younger demographic with a lot of discretionary income is a recipe for success; advertisers covet this combination because viewers who fall under this category have the means to spend liberally on products and oftentimes might be persuaded to either adopt a brand for the first time or betray current brand loyalty in favor of a replacement. While Internet platforms might not be in the same ratings league as networks, the fact that they seem to garner an attractive audience indicates that the search for incremental revenue in this arena is justified.

Further justification for such a search can be found in the study's other conclusion in terms of the Internet's ability to erode viewership on the traditional channels. Streaming shows like Desperate Housewives might actually only serve to increase the audience for programming by increasing availability and offering the chance for viewers to decide when they want to watch something -- "time-shifting," as they say. ABC, et al. might find that revenues will be enhanced rather than replaced by the increased engagement of digital strategies. What this study suggests to me is that, at least for now, it's pretty safe for media companies to try and replace the viewers lost to the Internet by, in fact, having a significant presence on this competing medium. None of this is to say that the traditional networks have lost their relevance -- they obviously remain the significant distributional channel for programming -- but, again, let's look at this a nice ancillary opportunity. The synergy aspects cannot be ignored, either -- broadcast networks send viewers to their brands on the Web, and their Web brands can send 'em right back to where they started. Viacom (NYSE: VIA  ) believes in synergy between the Web and cable, as evidenced by cyberspace initiatives involving its MTV Networks asset.

Cultivating another viable advertising platform will benefit the networks since they can offer advertisers even more options and value for their ad budgets. This study indicates that traditional media's embrace of digital distribution is correct strategy. Whether it be the Web or video games, new mediums are popping up that are challenging the dominance of traditional broadcasting networks; chasing eyeballs here might be quite fruitful in the end.

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Fool contributor Steven Mallas owns shares of Disney and General Electric. As of this writing, he was ranked 5,430 out of 20,778 investors in the CAPS system. Don't know what CAPS is? Check it out. The Fool has a disclosure policy.


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