What does WB.com mean though for Warner’s existing network, the CW? Warner Brother’s discontent with running a traditional network was apparent a few months into Rosenblum’s tenure after he became a key architect in the deal (along with Paramount’s Nancy Tellem) to merge the WB network with UPN to create the CW. Rosenblum said the merger was necessary “on a practical level, on a strategic level and on an economic level,” but the network is bleeding a huge amount of cash these days, forcing Warner to seek these alternate revenue streams. If the online model does prove to be as successful as Warner hopes, one has to wonder if the CW’s days are numbered if WBTVG reprioritizes its commitments.

Premise #3. Chasing after alternate streams of revenue will complement their current businesses.

The leveling of DVD sales is playing a role in prompting the online initiative. DVD sales overall in 2007 were flat compared to 2006 and any future growth is expected to be weak. WBTVG is likely following the lead of the Warner Brothers Home Entertainment Group, who in early trials is finding success offering video on demand (VOD) via cable as an alternative to video rentals. WB Home Entertainment found DVD sales increased in those trial markets and wished to expand VOD. It’s possible the same could happen with TV DVD sales if viewers connect with certain Warner shows streamed online.

What about revenue for some cable stations and other syndication outlets? That’s especially an interesting question within the Time Warner family, since Time Warner owns TNT and TBS and sees plenty of future value in those networks. Is this initiative supposed to help or hurt cable channels? How can they get people to keep cable subscriptions when the shows are all available online? Will cable channels be forced to invest more into original programming, which is a costly venture? Will WB.com be offering specific programming only that the TW cable channels don’t need or want? The impact remains to be seen, but one wonders if Time Warner is really using a unified strategy across divisions on this bold new direction.

There will be huge costs associated with WBTVG handling the distribution themselves, but they believe the benefits will outweigh the costs. They must take over the marketing involved with getting viewers to connect with a show, which was a burden previously put on the networks. This will result in a lot of upfront spending in marketing but the logic is there will be more money for marketing since streaming costs keep dropping rapidly. The idea of streaming shows and skirting the costs of pressing DVDs is appealing to the overall business plan, but the notion that it offsets all the new costs? It’s new math all over again.