Does NBC Plan to Make Money Off the Online Stream of "The Jay Leno Show"?

Last Updated Sep 21, 2009 1:33 PM EDT

No, I'm not done yet with blogging about last week's launch of "The Jay Leno Show." As this show breaks from familiar TV territory in a number of ways, I suppose it's fitting the network is actively promoting that it can be watched in its entirety online, as evidenced by this ad that I saw on Mashable the other night. You really don't see that very often. Usually, it seems like the networks don't take promotion of their streamed shows outside of the site the shows reside on.

The fact that NBC is actively doing this got me to thinking-- does the network actually think it's going to make money from the online version of the show, when conventional wisdom says that TV networks should proceed with caution when it comes to the Web, lest they cannabilize the more lucrative TV audience?

Since the economics of "The Jay Leno Show" are different in many ways, the answer could be yes. There are a couple of reasons why:

  • First, since no one really knows how this show is going to deliver over the long-term, NBC is charging about half or less for a 30-second TV spot on "Leno" than the dramas showing on the other broadcast networks. Online, the competitive set is different, and that distinction essentially goes away. As a recent feature in Adweek about Hulu estimated, the site is charging between a $25 and $40 CPM (cost-per-thousand viewers), while broadcast TV "depending on daypart" comes in at about $30. Since "Leno" on TV is charging well below that, you can see where, on a CPM basis, online commands the higher rate, even though it's a much smaller audience. (Also, important to remember that online video has fewer commercial slots.)
  • As industry consultant Steve Goldberg points out, since some viewers would like to watch "Leno" but can't bear missing their favorite 10 p.m. drama. "The online version should actually get some incremental audience versus cannibalize," he says. "In that case, the online ads (with the correct CPM) will help defray costs."
  • Goldberg also points to a third reason the show might benefit from promoting its online version: there's no benefit to the networks from DVR use, the most common way people time-shift their TV viewing. "In that case you get no incremental revenue and the ads are probably skipped," he says. "So the online can be incremental revenue. Icing on the cake? When you get something like Kanye West, the online version is an even better value for an advertiser and an even better return for NBC because of all these reasons."
So are their ads running on the online edition of "Leno." You betcha. On NBC.com, the main advertiser is Target. On Hulu, different editions of the show were sponsored by Axe, Halo 3 and Herbal Essences, which when you consider Hulu's propensity for public service ads, is really good. Shorter videos from the show on Hulu also had ads: from the Nissan Cube and OnStar. Not bad.

Previous exhaustive coverage of "The Jay Leno Show" on BNET Media: