What The CW's About-Face On Streaming Says About Piracy, Authentication

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While its relevance in the realm of traditional linear television is more questionable than ever, the CW’s youthful, digitally literate core audience renders the network an important signpost on where the distribution of TV on emerging platforms is headed. And if the CW’s decision this week to collapse the digital debut of its shows on its CWTV.com platform from 75 hours to just eight hours is any indication, it all seems headed back to square one.

As first reported by Variety Wednesday, CW is going to begin streaming series including The Vampire Diaries and Gossip Girl just eight hours after their debut on linear TV. The network explained the move as an attempt to ward off digital piracy—it said 20 percent of streams for its shows were facilitated by unauthorized sources. The network said 50 percent of that illegal viewing comes within the first three days after broadcast.

In short, CW, which was the first network to establish delays on streamed episodes, seems to have found that the price of piracy is too high.

CW, which was jointly founded in 2006 by CBS Corp. (NYSE:CBS - News) and Time Warner (NYSE:TWX - News), established the 75-hour window early on to support Nielsen’s “C3” audience-measurement metric, which factors in viewership on digital video recorders up to three days after initial airing. The network viewed the delay as a means of driving as much viewership as possible into C3, which is the metric the network sells its advertising on. And this delay was somewhat iconoclastic at the time, with the other broadcast networks choosing to make their series episodes available on their own sites and on Hulu the next day after broadcast. The general logic during that 2006-07 period was that, even though digital revenue was minimal, it was better for the networks to stream these shows themselves than let them to go the seed of torrenting. 

However, with recent test-market results showing that streaming delays have little effect on CW linear television ratings, which are down about 20 percent this year, the network chose to collapse its windows.

The move seems counter-intuitive to TV industry trends—notably those established by last year by Fox (NSDQ:NWS - News), which placed an eight-day delay on digital streaming for viewers who either don’t subscribe to specific cable, satellite or telco TV services or don’t have a Hulu Plus subscription. With other TV networks like Disney-owned ABC (NYSE:DIS - News)—a Hulu co-owner—also reportedly considering similar delays, it was believed that such windowing was where the TV streaming business was heading.

But the decision by the CW, which caters to an audience demographic that, on average, is at least 10 years younger than all of the other broadcast networks, seems to undermine that notion. For one, the CW window collapse doesn’t seem to support the movement towards supporting subscription streaming on Hulu Plus. Last year, CW signed a megabucks five-year agreement with Hulu, which made the network’s shows available for streaming the next day on $8-a-month Hulu Plus (it remains eight days on free-to-view ad-supported Hulu). For avid fans of the network, there would seem to be less incentive to pay a subscription fee to Hulu, since they can enjoy free next-day access of CW shows on virtually any device via CWTV.com. Hulu had no comment about this.

Secondly, collapsing the 75-hour window would seem to undermine Fox’s quest to support TV Everywhere authentication. With Fox parent company News Corp. enjoying the hundreds of millions of dollars its owned and operated stations are bringing in from cable operators in the form of retransmission fees, Fox is using streaming access to bolster the existing pay TV model.

The logic: don’t want to wait eight days to stream that episode of American Dad? Get a subscription to a TV services provider like Dish Network.

With CW not owning any stations, retransmission fees—and supporting the cable model—are less of a concern. Still, with CW having been the first to try streaming delays, only to find that they encouraged piracy, it might seem that Fox will soon face a similar cost-benefit decision.

In August, for example, shortly after Fox established its eight-day window, the blog torrentfreak.com found notable upticks in the quantity of illegal Fox series downloads in the days following initial broacast.

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