News Corp.'s Fox Entertainment Group Inc. said Wednesday that it had sold the syndication rights to its quirky-but-canceled sitcom, "Arrested Development" to Microsoft Corp.'s MSN Internet portal.
The three-year deal marks the first time that a major Hollywood production studio has turned to the Internet for a bona-fide buyer of syndicated shows. Until now, studios have sold their reruns of shows such as "Seinfeld" or "Friends" to TV station groups and cable channels, reaping huge profits in the process.
But Fox was in a pickle when it came to "Arrested Development," the Emmy-winning comedy about a dysfunctional family of Orange County real estate developers. The series lasted just three seasons on the Fox network. Only 53 episodes were produced -- about half the number of a traditional syndication deal. That forced Fox to get creative.
Executives believed that the comedy, which garnered a small but loyal audience, would be a good test of the power of the Internet for delivering TV content.
"We look at this as an opportunity to open up a new market," said Gary Newman, president of Twentieth Century Fox Television. He would not disclose terms of the deal.
The experiment comes at a time when the traditional TV syndication market has been weak, leaving studios struggling to win the multimillion-dollar license fees that were common five years ago. In addition, the explosion of video websites has increased the value of content popular with the Internet crowd.
Microsoft plans to offer free streams of the shows, which will include advertisements. Fox also struck deals for "Arrested Development" with HDNet, for the high-definition rights, and with G4 Media Inc., which bought basic cable rights.
"This is a very large deal for us," said Rob Bennett, MSN general manager for entertainment. "It fits right within the sweet spot of our strategy to invest in great content for the people who are spending time on MSN."
Many media companies have been migrating their shows to the Internet. Time Warner Inc. this year launched In2TV on AOL, which allows users to stream episodes of shows such as "Welcome Back, Kotter."
Warner Bros. used Internet rights as a carrot in the syndication of the Charlie Sheen sitcom "Two and a Half Men." Next year, Tribune Co. will air the reruns on its TV stations and offer streamed episodes on local station websites. Tribune also publishes the Los Angeles Times.