CBS to Launch Online Video Subscription Service


CBS (NYSE:CBS) is launching an online subscription video service that will feature both current and classic programming as well as a live stream of its broadcast network.

The platform, called CBS All Access, is making its debut Thursday at a price of $5.99 a month. Unlike many other online offerings from broadcast and cable networks, an existing subscription to a pay-TV distributor isn't required to view content on CBS All Access.

"CBS All Access is another key step in the company's long-standing strategy of monetizing our local and national content in the ways that viewers want it," said Leslie Moonves, president and chief executive of CBS Corp.

Separately, CBS is also putting the finishing touches on its plans to introduce a stand-alone digital news service later this month. The tentative debut date is Oct. 28, people familiar with the plans said.

The new offerings are further evidence of how program suppliers are increasingly willing to distribute their content outside the traditional ecosystem of cable and satellite TV especially as consumers get frustrated with rising monthly TV bills. On Wednesday, Time Warner Inc's (NYSE:TWX) HBO said it would start offering its service via broadband to U.S. consumers who don't have a pay-TV subscription.

In addition, as the competition for advertising grows more intense, increasing subscription fees will become even more important to programmers, which media analysts anticipate will make the so-called over-the-top route more appealing in the coming years.

"Everybody is going to the drawing board to figure out how to make more money in this challenging environment," said Tony Wible, an analyst at Janney Montgomery Scott.

Pay-TV distributors that compensate CBS in return for distributing its content may be less than thrilled with CBS's new venture because it could potentially undercut their value to customers.

CBS officials counter that All Access will be complimentary to existing video providers and that the price tag will limit its appeal primarily to people who currently don't subscribe to a multichannel video program provider.

In an interview, Mr. Moonves said All Access will be made available to pay-TV companies as well, who could offer the service to their customers for a lower rate.

"We think everybody wins from this," he said.

The CBS service is somewhat similar to Hulu, the video platform jointly owned by 21st Century Fox (NASDAQ:FOXA), Walt Disney Co. (NYSE:DIS) and Comcast Corp. (NASDAQ:CMCSA), which are the parent companies of Fox, ABC and NBC, respectively. Hulu has both a free service and a subscription option called Hulu Plus, which has about 8 million subscribers and costs $7.99 a month.

The difference is that CBS All Access also has a live stream of the network as part of its offering. ABC has a similar service called Watch ABC that lets viewers get a linear feed of the network on their phones and tablets. Unlike All Access, Watch ABC is available to anyone with an existing subscription to a pay-TV service.

Not all of CBS's popular content will be part of the live stream. CBS cannot offer its Thursday and Sunday National Football League games on All Access because its current contract with league prohibits it.

"We hope to accomplish that before too long," Mr. Moonves said.

The live stream of the CBS network will initially only be available in the 14 markets where the company owns TV stations, which includes New York, Los Angeles and Chicago. CBS is talking with its broadcast affiliates in other cities about participating in All Access.

CBS affiliates will get a percentage of the local subscription fees for All Access, Mr. Moonves said.

CBS said episodes of current shows will be available on All Access 24 hours after their initial airing on the network. The commercial load in those shows will be about 25% less than their network airing, said Marc DeBevoise, executive vice president of CBS Interactive. While all episodes of current CBS shows available on All Access will have commercials, older programs such as "Star Trek" and "Cheers" will be commercial free.

"No one has gone out there and put out a network branded product with the breadth and depth of CBS All Access," said Mr. DeBevoise.

All Access will have more than 5,000 episodes from the show's library. Mr. DeBevoise didn't rule out eventually creating original content for the platform.