Quincy Smith is the digital man of the hour at CBS, the president of newly created company-wide CBS Interactive tasked with ensuring that CBS makes the most of its digital potential—and that CEO Leslie Moonves doesn’t follow Tom Freston out the door. Our extended conversation early today (just after the official announcement of his joining CBS) featured a man full of ideas and details but wary of sounding too glib or all-knowing, especially in what he called “hour two.” He mentioned every major CBS exec and gave full credit to Larry Kramer, outgoing president of CBS Digital. Why CBS? In large part, says Smith, because CSTV co-founder Brian Bedol is there. Smith’s most recent employer, Allen & Co., had an investment in CSTV and a seat on the board. He sees it as a sign of an open attitude that a serial entrepreneur like Bedol still wants to work within the company. “The fact that he’s here and doing things means a lot to me,” Smith explains.  He also stressed that the move is less about him and more “about CBS Corp. realizing that interactive needs to work with other businesses. ... We have to all communicate.” So does CBS have an actual venture fund? “Nothing organized but obviously there’s cash on hand.” (Just a billion of so.)  We talked about M&A, WiFi billboards, Sling Media, YouTube, cable, you name it. Some excerpts:

What is going to make what you’re doing different from what anyone else is doing? Smith: “The first thing I’d say is without a doubt the differentiation between CBS and all of our peers is our existing asset class. We’ve got the #1 television network on the planet, the #2 radio
network and the #1 outdoor.  Let’s take outdoor for a second. How’s outdoor interesting? ... (Among the ideas) What if we put routers on every sign and WiFi enabled cities faster than any municipality could.” To the assets, Smith adds “forward-thinking” management from Moonves on down. “Early deals like embracing YouTube rather than trying to sue them shows that we understand and appreciate the fact that users are absolutely going to be controlling our content in the future and so we need to accept that and move on—and how do we move on? Well, they’re going to be closer to our content than ever before so can we learn from them? What’s the community in place where we actually get to learn about them, what they like and what they don’t like so we can design better professional content for them in the future?”

There’s really been a tremendous turnaround in the last 18 months at CBS in the digital strategy.Smith: “Full tribute to Larry and his team on that so far., I’m very lucky to effectively be finding the parade and jumping in front of it. All the work that’s been done so far is great and we’re just going to build on it. There’s no erasing the prior stuff at all. Larry’s done an amazing job.”
(Working across CBS) means thinking about things like how do you use the billboards to maybe send Bluetooth promotions to me about what Nancy (Tellem’s) doing? Smith: “Now you’re getting very radical … absolutely.  We should consider it and, also, being a child of the internet, I realize there’s some spam potential built into that. Not everybody likes their phones lit up
every time they walk across the block so these are the kinds of things we need to think about is that subtle balance. People should be having more access to our content but at the same time not in such a way that it bothers or distracts them. That it’s there when they want it.”

There’s a lot of attention on M&A ... but at the same time that shouldn’t obscure the operational? Smith: “Most of my focus right now is going to be on operations and good commercial deals with existing content. Larry’s already built an amazing infrastructure. Obviously, if we find some pickup applications we’re going to do that all day … if we have the chance to make more equity investments like SpotRunner, we’re going to do that all day … but this is not an acknowledgement that all of the sudden CBS is going to become a deal factory.

You have a couple of deals going on that to the outsider look perhaps more promotional than revenue raising right off the bat, like YouTube. Smith mentioned some of the efforts underway with YouTube, like the athlete profiles from CSTV, “that didn’t necessarily work well in the linear environment. ...  If we can take those and expand those into more communities that would be great and the revenue opportunity’s there, they will come and we’ll start to monetize it. For now, I’d say that the big win is we’re deep linking. When you see one and you want to click to see ‘more like it’ you’re not just seeing CBS.com and some kind of crazy posting about an online soap opera ... We’ve got to make sure it’s contextual and then that it relates right back to the YouTube community as well.  You can be sure that in the future, while we want to experiment, we absolutely realize there’s monetary value in this as well so that’s what this is all about.”

Google Video—The NBA announced it was participating at the same time as CBS and the NBA just pulled out. Where does the future stand for CBS in deals like that? Google Video specifically but also selling downloads externally and internally? Smith: “The Google thing first – we’re in conversations with a lot of partners. In fact I want to be in conversations with many, many more so we’re not going to talk about Google specifically.” He expects the combination of YouTube and Google to create “an awesome environment” but not the only one. “In terms of subscription versus advertising—I’ll tell you my bias but it’s very early… it seems to me that advertising models are working very well with video – and I’m not even talking about interstitials, I’m just talking about putting up displays or frankly text-based … That doesn’t say subscription isn’t ultimately going to work – maybe with micropayments we’re going to get a much better process, in fact. With some of the categories like Showtime, that’s a subscription service on cable—how are we going to deal with that.? … what about sponsorships? What about dropping in GM cars into CBS content one day? How is that going to work overall? All of these things I’m open to thinking about ...  Early evidence is that the advertising model is making a lot of traction ... Do you agree?”

I think where the advertising model starts to break down is where you can’t do downloads—streaming versus portability. Smith: “We are going to have a lot of conversations about that for sure. … How else are you going to justify that? Is a different ad going to pop up on a closed network when you’re watching on your laptop? These are all the kinds of things we’re thinking about. Frankly, the people to really talk about that are the people I’m now lucky enough to have access to.”

I can see a time when Showtime online could be sold through my cable operator. Smith: “I have had the pleasure of advising Comcast for longer than I have CBS so those are definitely players we need to pay attention to. ... The CBS-Comcast relationship is a very strong one. We have to pay a lot of attention to this kind of stuff. The simple fact is that there’s no evidence that I can see yet so far that demonstrates that online distribution when done properly cannibalizes existing markets … We’re going to keep pushing on that.”

Back to M&A, how do you define a small deal? Smith: “Well, look, one of the things I was really worried about in this announcement that if people assume I’m just looking for the next YouTube that we’re not also looking to invest in larger deals. There’s no real way to define a small deal anymore, particularly in this market. There’s metrics. There’s headcounts. There’s valuations. There’s all kinds of ways to look at these things … We’re going to look for the technology and services that best fit us.  We’re going to be looking to partner more than we’re going to be looking to acquire—and to take ownership positions.”

Are your primary competitors for deals now Fox Interactive? Is it Viacom?  “I don’t look at competitors and maybe that’s where I’m crazy. I will absolutely tell you my one clear message without a doubt on behalf of all of CBS: we definitely want to be in the mix. We definitely want to be included in these conversations and it would be a real shame if we weren’t aware of certain things going on and frankly, if we get the chance to help set a pace… I know you know Blake (Krikorian, CEO, Sling Media) already – look, let’s be honest, Sling is an amazing revolutionary thing. A lot of people would say it’s disruptive ... disruptive doesn’t matter to me. It’s a known entity and it’s happening whether we like it or nor. So the answer is you can either ignore it or throw a bunch of lawyers on it or you can go be where the opportunities are for it. That’s the attitude we’re going to take.”