During 2011, CBS Corp. (CBS) has signed licensing agreements with two major providers of online streaming services, as it aims to further monetize its valuable content assets. The traditional broadcast network owner, facing a shift in viewership to cable and the Internet, is looking to offset the impact of slowing businesses by further expanding distribution. Fox Networks, owned by News Corp. (NWS), is also building its presence on the Internet. These deals appear to have thus far generated a relatively modest amount of revenues for the entertainment companies, though at favorable margins. They expand upon existing relationships with Hulu, a subscription-based website that offers streaming video of TV shows.        

While it and the major television networks have already been offering programming on their respective websites and Hulu, CBS Corp. is now aggressively licensing TV shows to online subscription-based services. In February, it announced a two-year, non-exclusive agreement allowing domestic NetFlix, Inc. (NFLX) subscribers to instantly stream episodes from the CBS drama and sitcom library.

CBS’ revenues from that deal amounted to about $100 million in the second quarter. Management has noted that the margin on these revenues is a whopping 50%-60%, supporting the company’s bottom line and alleviating the effect of sluggish revenue trends in broadcast TV and radio. Currently, CBS-owned shows available for viewing include Medium, Flashpoint, Frasier, Family Ties, Cheers, and others. As of early August, only about 7% of CBS’ inventory was available. However, this percentage is apt to increase steadily.

Looking to build upon the progress it had made with NetFlix in the U.S., in July, CBS made a pact with Amazon.com, Inc. (AMZN) and expanded its NetFlix deal to Canada and Latin America. The Amazon Instant Video service allows members to watch the offered CBS programs at no additional charge. In Canada, NetFlix will charge $7.99 a month for ability to view much of CBS’ network and episodes of premium-network SHOWTIME shows.

As for News Corp.’s FOX network, on April 15, 2011, it rolled out the availability of episodes on Dish Network ‘A’ (DISH)-owned Dishonline.com, with no extra cost to DISH customers. Dish Network has said that it plans to further invest in television libraries for redistribution, and the other networks are thus likely to get on board. Incidentally, as of mid-August, News also owned 32% of Hulu, with Disney (DIS - Free Disney Stock Report) owning another significant portion.  

The move by traditional networks into online licensing deals with NetFlix has trailed that of cable broadcasters, as a significant amount of cable content is already available on that site. For instance, media conglomerates Time Warner, Inc. (TWX), Viacom (VIAB), Disney and News Corp. offer programming inventory through NetFlix. Of note, this April, Time Warner entered an agreement with Dish Network to offer streaming of its premium HBO and Cinemax titles.

In summary, CBS has proven that the licensing of content to externally-owned websites can be lucrative, and its traditional broadcast network peers may well follow suit. The sizable customer bases boasted by NetFlix, Amazon, and Dish Network should help to provide these companies another source of revenues as viewership continues to slowly erode. Plus, it is likely that a number of new online services will spring up, providing the means for further expansion of distribution. Google (GOOG) and Microsoft (MSFT - Free Microsoft Stock Report) are among possible market entrants.      
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.