For its entire existence, the CW has been battling criticism that its target young (and primarily female) demographic is way too narrow to support a broadcast network. The drumbeat grew louder as TV audiences started migrating online, with younger viewers leading the charge, further eroding the CW’s modest ratings. In a first step to try to stop the bleeding, the network last year started bundling its on-air ad sales with those for the streaming its shows on the CW’s Web site with a full commercial load. The move alleviated the problem a bit but didn’t change the reality that the CW was a network that was losing money and was going dark for extended periods of time including the entire summer. Part of the problem is the fact that the CW airs serialized young-skewing dramas. They don’t repeat well, leading to stretches of dismal ratings for the network with no originals and generating virtually no syndication value for the CW co-owners CBS and Warner Bros. whose TV studios produce all of the network’s scripted series.
Within the last couple of weeks, the network was part of two major online distribution deals that take major steps towards resolving both issues. First came the 4-year pact CW’s co-parent companies CBS and Warner Bros. signed with Netflix for streaming previous seasons of the network’s current series. The deal, which analysts estimate could bring CBS and Warner Bros. as much as $1 billion, would help make up for lost syndication revenue because of the serialized nature of the shows. Additionally, the pact doesn’t prevent the studios from pursuing cable syndication deals in the future (not that such deals appear likely.) Then came the Friday’s deal with Hulu, this time made by the CW itself. It will have the episodes of network’s current seasons stream on the Fox-NBC-ABC-owned online hub — right away for subscribers with limited commercials and free for everyone 8 days after the episode’s original airing on the CW with full commercial load. (cwtv.com will continues to stream the episodes starting 3 days after their premiere.) The revenue from that deal is nowhere near the one with Netflix but an insider described it as “meaningful”. It will go mostly towards programming and marketing at the network, including investing in original summer fare, the CW president Mark Pedowitz said. The deal is interesting because CBS has been a longtime Hulu holdout (though the network recently signed a deal for Hulu’s subscription-only service in Japan.) Pedowitz hopes to use Hulu as “a massive marketing platform” to reach viewers that the network hadn’t before, and “hopefully bring people to the stations and help make (the CW series) more live events than Live+7.” The CW shows get a disproportionally large ratings bump in Live+7 with the highest average percentage increases among all broadcast networks, but live viewing is valued more by advertisers. The two deals won’t make the CW profitable but, as analysts noted, they’re putting the network on a path to profitability.
The broadcast network business was built on close-ended procedurals that repeat well to allow nets to maintain stable ratings levels throughout the year and producing studios to sell those shows in broadcast and especially cable syndication for top dollar. Then streaming services like Netflix came along where serialized dramas whose syndication value is almost non-existent are far more attractive. Lionsgate TV paved the way with its Netflix syndication deal for Mad Men earlier this year, and now CBS and Warner Bros. have taken it to the next level with the entire portfolio of the CW’s current series. But if those series seem to work better online than they do on broadcast, wouldn’t it make more sense if they were produced directly for digital distribution, eliminating the great expenses associated with managing a broadcast network? Pedowitz dismisses such a notion. “You need the broad platform that makes the shows interesting to companies like Netflix and Hulu,” he said, adding that it is because the CW shows have the title recognition and production values associated with a network series that they are so attractive to the digital services. At TCA in August, Pedowitz stressed that adding more close-ended procedurals was one of his development goals for this season. The deal with Netflix, which puts a premium on serialized shows, hasn’t changed that, he said. “We will have a healthy programming mix of shows. “We’re still a broadcast network, we still want to have shows that repeat well.”
Like the characters in most of its shows, the CW is coming of age. But instead of fighting its niche appeal, the network is finally embracing it. And after struggling for years with the fact that a large portion of its audiences prefer to watch its series online (remember the network’s 2008 decision to strop free streaming Gossip Girl in an effort to try to force viewers to watch it on TV?), the network seems to have finally come to terms with it. As they say, if you can’t beat ’em, join ’em.