This week, as The CW begins to debut its season premieres, viewers used to streaming those shows on Hulu will be in for a surprise. The network's five-year deal with the streaming service has lapsed, which means that for the first time, The CW's website and apps will have exclusive in-season streaming rights to its shows like Supergirl, which has migrated over from CBS, Jane the Virgin and The Flash.
It's a brave new digital world for The CW, which created its CW Seed digital platform in 2013 in part so it would one day be prepared to go it alone without Hulu. Last week, the network rolled out its CW app on Roku, Apple TV, Xbox, Chromecast and Amazon Fire, and will be amping up marketing efforts to direct audiences to the new digital destinations.
"When you know this is the only place you have to go, that makes a big difference, and it helps our business model," said network president Mark Pedowitz.
While ABC, Fox and NBC, whose parent companies jointly own Hulu, were able to sell a big chunk of their ad inventory on the streaming service, The CW was not given the same access to Hulu ad revenue. (That did not change when Time Warner, which jointly owns The CW with CBS Corp., acquired a 10 percent stake in Hulu in August.) "We had none of it, and I'm sure a lot of advertisers went there to get our shows," said Rob Tuck, evp, national sales for The CW. "The advertisers had been looking for more from us because our inventory was somewhat constrained, and we now have been able to release it. We've got a lot more available to us, and clients definitely responded. Our digital growth this year was really significant."
Sources close to Hulu counter that the company didn't want to pay more to renew its deal, and be required to take on the entire network's portfolio without in-season stacking rights to all episodes of a current season when only The Flash and Arrow were generating meaningful traffic on the site.
In addition to being the only network to offer unauthenticated access via its apps ("our median age on digital is 23, and our viewer does not want to authenticate," explained Tuck), Pedowitz and Tuck have reduced The CW's digital ad load this season, from 12 minutes per hour, which mirrored the linear load, to seven-to-nine minutes per hour. "We're trying to figure out what is the right load so that viewers feel that they've had a great viewing experience," said Pedowitz.
While The CW ended its partnership with one SVOD, it has enhanced its relationship with another. In July, the network signed a lucrative, multiyear deal with Netflix, giving that company exclusive streaming rights to full seasons of each CW series, beginning just eight days after its season finale. Under its previous CW deal, Netflix did not get streaming access until several months after a season had concluded.
While Pedowitz is confident that viewers who watch his network's programming in-season won't be tempted to wait and binge the entire season on Netflix in May, others aren't so sure. "What does this ultimately do to live, linear ratings?" said BTIG Research media analyst Rich Greenfield. "The easier you make it to watch all your content ad-free in a binge fashion, the harder it is to ultimately get people to continue to watch live linear, with 20 minutes of disruptive commercials."
Buyers, however, are optimistic so far about The CW's new digital strategy. Lyle Schwartz, managing partner at GroupM, said the network's research indicates that viewers were discovering past seasons on Netflix and then returning to the network to watch or stream current seasons. "They did a thorough analysis to try and figure out how to optimize their audience," said Schwartz, "and also bring an opportunity for people to sample it in nontraditional environments."
This story first appeared in the October 3, 2016 issue of Adweek magazine.
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