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Serving Up Television Without the TV Set

The “stupid computer” is a repeated target of the dimwitted office manager Michael Scott on “The Office.” But the show itself may be motivating viewers to put down their remote controls and pick up their laptops.

When the fourth season of “The Office,” an NBC comedy, had its premiere in September, one in five viewings was on a computer screen instead of a television. The episode attracted a broadcast audience of 9.7 million people, according to Nielsen Media Research. It was also streamed from the Web 2.7 million times in one week, the executive producer, Greg Daniels, said.

A screenshot of hulu.com.
thms.nl
A screenshot of hulu.com.

“The Office” is on the leading edge of a sharp shift in entertainment viewing that was thought to be years away: watching television episodes on a computer screen is now a common activity for millions of consumers.

“It has become a mainstream behavior in an extraordinarily quick time,” said Alan Wurtzel, the head of research for NBC, which is owned by General Electric and Vivendi . “It isn’t just the province of college students or generation Y-ers. It spans all ages.”

A study in October by Nielsen Media Research found that one in four Internet users had streamed full-length television episodes online in the last three months, including 39 percent of people ages 18 to 34 and, more surprisingly, 23 percent of those 35 to 54.

“I think what we’re seeing right now is a great cultural shift of how this country watches television,” said Seth MacFarlane, the creator of “Family Guy,” a Fox animated comedy that ranks among the most popular online shows. “Forty years ago, new technology changed what people watched on TV as it migrated to color. Now new technology is changing where people watch TV, literally omitting the actual television set.”

Although people are watching their shows, the networks are loath to release data about how many people are watching TV shows online and how often. The reason? Possibly because Internet viewers are worth only a fraction of the advertising dollars of television viewers.

“The four and a half billion we make on broadcast is never going to equate to four and a half billion online,” said Quincy Smith, the president of CBS Interactive.

The most popular television shows tend to be the most-viewed online as well. While the doctors and nurses of the hit ABC drama “Grey’s Anatomy” look a little pixelated on a computer monitor, episodes of the show have been streamed more than 26 million times on ABC.com in the last six months, adding the equivalent of two full ratings points to each telecast.

“Heroes,” “Ugly Betty,” “CSI,” “House” and “Gossip Girl” are among the other online hits, analysts say. Just how many shows are being streamed is unclear because there is no widely recognized version of the Nielsen TV ratings for the Internet yet.

Regardless of the content, the shift is forcing the networks to rethink the long-held axioms of network schedulers and advertisers.

In an address in January to television executives in Las Vegas, Jeff Zucker, the chief executive of NBC Universal, noted that NBC.com had measured more than half a billion video streams in just over a year.

Execs "Still Learning" About Online Audience

Mr. Wurtzel has found that most consumers — at least 75 percent in his studies — prefer to watch higher-quality versions of episodes via their trusty TV sets. They make distinctions between dialogue-driven comedies like “The Office,” which are better suited to laptops and iPods, and special-effects-laden dramas like “Heroes,” which look better on a big screen, he said.

For a variety of shows, the Web proves valuable as a time machine, permitting users to catch up on missed episodes. The Web site for “Jericho,” a show that was canceled by CBS but revived last year because of Internet-savvy fans, had roughly 1.3 million video views in the first week after the show’s second-season debut on Feb. 12. Less than half of those views were of the premiere episode; the rest were from viewers catching up on the first season or sharing clips.

In addition to tracking the episode views, CBS measures the amount of online conversation happening about shows.

“We’re still midstream,” said Nina Tassler, the president of CBS Entertainment. “We’re still learning about people’s behaviors and we’re still learning about what shows really resonate with an online audience.”

Other consumers use the Internet to discover new shows. Jason Kilar, the chief executive of Hulu, heard rave reviews of the NBC comedy “30 Rock” last year but never took the time to watch the show until he could stream it online. After one episode, he was hooked.

“After I put my kids to sleep and I have a few minutes to spare, I’m able to catch up on the show,” he said. “It provides an opportunity to both sample and consume content without having to schedule the DVR, without having to think about the on-air schedule.”

For the time being, broadcasters are harnessing the audience interest in different ways. Hulu content is widely distributed on MySpace, Yahoo , AOL and a variety of other sites. Similarly, CBS has chosen to syndicate its shows across a range of sites called the CBS Audience Network.

ABC, a subsidiary of the Walt Disney Company , has been more guarded with its content, making episodes available for streaming on only its Web site. Mike Shaw, the president for sales and marketing for ABC, said ABC.com has served up more than 220 million ad impressions, or views, in the last six months, up 188 percent from the same time period a year earlier.

And in the last month, all the broadcast networks have added classic series to their Web sites, making shows like “Star Trek,” “MacGyver,” “The A-Team” and “I Dream of Jeannie” available online. For companies that have sold all their available advertising space, tapping into their show libraries creates new opportunities.

“We would love to have more inventory,” Patrick Keane, the chief marketing officer at CBS Interactive, told reporters last week. “The advertisers are raring to go.”

"Our challenge with all these ventures is to effectively monetize them so that we do not end up trading analog dollars for digital pennies,” Mr. Zucker said, calling it the No. 1 challenge for the industry.

Some people pay for episodes via Apple’s iTunes Store and Amazon’s Unbox service, but many more appear to be watching streams of free, advertising-supported episodes on Web sites. In a closely watched effort, NBC Universal and the News Corporation are about to introduce their joint streaming site, called Hulu.

One piece of good news for the networks and advertisers is that viewers are more likely to remember ads on the Internet versions of TV shows, partly because the commercials are less numerous and more demographically aimed online, according to many studies.

For the moment, at least, conventional wisdom holds that the television and the Internet will essentially merge in the foreseeable future. Already, the hardiest of online viewers are letting PC screens replace their TVs altogether. Others are merely letting broadband connections supplement their digital video recorder.

About six months ago, Peer Gopfrich, a screenwriter in Los Angeles, bought a high-resolution liquid-crystal display TV screen for his living room. Around the same time, he discovered that the television networks were offering some shows online in a high-definition format, so he hooked an old computer up to his TV monitor and started streaming. Mr. Gopfrich’s computer became a free and seemingly endless source of on-demand television.

“All of a sudden, we could watch pretty much every popular show we wanted, when we wanted, in high definition in our living room,” he said.

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