After three years, two big acquisitions and one shift in corporate strategy, CBS said Wednesday that its chief of new media, Quincy Smith, was leaving in January to start his own advisory firm.
The tenure of Smith, 38, provides a window into the shifting Internet strategies of CBS and other media companies. All are struggling to preserve traditional businesses while also appealing to the growing audiences that want to watch entertainment on the Web -- for free.
"Clearly, that's the big question mark," said CBS Chief Executive Leslie Moonves. "How do we get paid for that content on the Internet?"
Three months ago, CBS joined a Comcast Corp. and Time Warner Inc.-led trial called TV Everywhere. The project allows viewers to watch some TV programs on their computers as long as they demonstrate that they are already paying subscribers of a cable or satellite TV provider.
The move marked a pivot for CBS, which under Smith had championed placing CBS shows on as many websites as possible, in the expectation that advertisers would pay enough for commercial time to make the online business viable. Now many TV executives doubt that online advertising alone will ever cover the high costs of TV production.
"As the number of viewers starts to get bigger, you have to make sure that the market, the economy, supports the business," Smith said in an interview, adding that "the model is just not there to support it."
Even the owners of Hulu, one of the most popular websites offering free TV shows, are weighing whether to charge viewers. TV executives want to avoid the predicament of the music and newspaper industries, which have lost paying customers in droves because of free offerings on the Internet.
Moonves recruited Smith -- a rapid-talking, sneaker-wearing investment banker -- in November 2006 when CBS was sitting on $3 billion in cash and itching to make bold bets. Moonves was determined to turn CBS, a network whose shows have traditionally attracted a large number of older viewers, into a player in a new medium that has a more youthful audience. He also didn't want to suffer the same fate as his corporate counterpart, Tom Freston, who lost his job as CEO of Viacom Inc. when News Corp. outbid Viacom for MySpace, at the time the dominant online social network.
The mandate from Moonves was to spend money on Internet acquisitions, and CBS did.
The company made several acquisitions, including spending $280 million for the British social network for music fans, last.fm.com, to complement the CBS radio business.
CBS' biggest deal, however, was the 2008 purchase of CNET for $1.8 billion. Analysts immediately criticized it for overpaying and depleting its cash reserves.
"Our timing on CNET was wrong," Moonves conceded. "We paid a lot of money to buy an advertising business right before the bottom fell out of the advertising market. But CBS, because of that purchase, has become a major player in the interactive space."
The CNET acquisition did give Moonves a management team for its Interactive division, including Neil Ashe, who will continue as CBS Interactive president and replace Smith as Moonves' point person on new media.
"The two have different skill sets," Moonves said, adding that Smith will become an advisor to CBS when he launches his boutique investment bank next year. Smith's focus, this time around, will be to help CBS figure out a way to earn money on the Internet -- not just spend it.