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American Idol Backer Launches First TV-Rewards App: 'Viggle'

Can the guy behind American Idol transform the way people watch TV? Robert Sillerman (whose former company, CKX, owns "American Idol") launched a new app, called Viggle, to upend TV-viewing and to drive more people to tune in, in real time.

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Nearly a year ago, Sillerman acquired an inactive public company, Gateway, and re-launched it as Function (X). Just today it announced its first venture, a free app called Viggle — a television loyalty-rewards program.

Viggle wants to reward people for being loyal to their favorite TV programs, and by engaging with those programs on their smartphone or tablet while they’re watching TV. The app is built on the fact that 75 percent of American living rooms use a second screen — an iPad, smartphone or laptop — over the course of a week and that TV shows are one of the most popular topics on Twitter.

Viggle allows advertisers to target consumers on their TVs and on their smartphones all at once, while incentivizing viewers to try new shows and keep tuning in.

Watch Julia Boostin's interview with Function (X) President and COO Chris Stephenson.

Here’s how Viggle works: its fingerprint technology listens to and identifies what show you’re watching — it works with live, recorded and online TV content from more than 100 channels.

To earn points users can "check in," just like they might with FourSquare, and can share “check ins” with friends on Twitter or Facebook. They can also rack up points by participating in games and polls about a show, interacting with a brand, or by checking into a new show a network is promoting. Then those points can be redeemed for real rewards, like a gift card to Burger King, one of Viggle’s launch partners, along with Sephora, Fandango, and Hulu Plus.

Viggle is also partnering with TV networks — Bravo and USA Networks (both owned by CNBC’s parent NBC Universal) and Simon Fuller’s XIX Entertainment are on board — for what they call “show specific engagements.” That translates to the shows offering extra points to viewers for participating in a poll or quiz.

Viggle earns money from advertising and expects to turn a profit in 18 to 24 months. Its biggest cost is the gift cards it offers as incentives, which it acquires at a discount.

Chris Stephenson, president and COO of Function (X), says that he’s trying to take advantage of the fact that only $1 billion is spent on mobile ads right now, while over $200 billion is being spent on channel and retail marketing and positioning. And some of the biggest opportunities will come from the networks — this is designed to drive more viewers to their shows.

Forrester analyst James McQuivey didn’t offer an opinion on the Viggle app itself, but he did weigh in on synchronized TV applications in particular. He says the “co-viewing space is exploding,” but warns “it is by no means a forgone conclusion that these apps will succeed, because people like the freedom of using their computing device to do things that are not related to what’s on the TV screen at the moment.”

The question is whether Sillerman’s instincts about the longevity and power of American Idol will also be right about multi-screen TV viewing.

Questions? Comments? MediaMoney@cnbc.com

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  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.