For now, HitBliss is available only on the web and on desktops, not on mobile devices — though the company plans to expand to other platforms soon. Among the available content at launch are new movies like Argo, Magic Mike and The Bourne Legacy and new episodes of shows like Real Housewives and The Walking Dead.

Users are served a “playlist” of ads that are delivered to them based on information that they include in a profile. When they watch the ads, they earn virtual cash that can eventually be redeemed for content. Users can specify how much information they’re willing to make available to advertisers; the more information they share, the faster they earn.

Other companies have dabbled with virtual currency in exchange for video. Yidio, for instance, gives users points for completing various tasks, and the points can then be redeemed for Amazon Video on Demand credits. HitBliss is different, however, in that both earning and viewing are done through the same platform.

As HitBliss users watch ads — which they can do at any time, not just right before they want to watch a movie or TV show — cash accumulates in their accounts, and they can redeem it when they wish. HitBliss charges $3.99 for a new movie rental, $1.99 for an older movie rental and $1.99 per TV episode. (Movie rentals last 24 hours, while users will own the TV episodes.) In general, about 8 to 10 minutes of ad viewing (roughly four ads) can be redeemed for one new movie.

The system includes a lot of checks to make sure that users are actually watching ads. “Advertisers are only paying when users are paying attention,” HitBliss cofounder and CMO Sharon Peyer told me. If a user plays an ad and then navigates away or mutes the sound, the ad pauses. An “attention assurance meter” — with a patent pending — occasionally requires users to click it to ensure that they’re paying attention; if they are not, “it gets very angry,” Peyer said, referring to a smily-face icon that turns to a frown the longer it is ignored, before ultimately resetting the ad and requiring the user to watch it again. Over time, users earn “trust points” that decrease the frequency of prompts to make sure they’re paying attention.

Peyer said the platform’s store will eventually expand to include other types of digital content, like apps and virtual goods. HitBliss is based in Lexington, Mass., and is backed by Andy Marcuvitz’s Alpond Capital. Peyer and her husband, CEO Andrew Prihodko, founded the company in mid-2008 after selling a video- and picture-sharing site called Pixamo.

On Thursday, the smallest of the major U.S. English-language broadcast networks, the CW, wrapped up its portion of the upfront market, a yearly selling ritual in which major media agencies buy the bulk of TV ad time for the coming season.

According to reports in Adage and Adweek, the CW garnered percentage increases of around 7 percent for the price it charges advertisers to reach 1,000 viewers, a metric labeled “CPM.” The other major networks, ABC, CBS Fox and NBC, are also looking at single-digit increases. CBS is leading the Big Four pack — which still has inventory left to sell — at around 9 percent.

Also read: Report – Broadcast networks will get 8% higher CPMs at upfront this year

That level of price increase is in line with expectations of around 8 percent overall. But it’s down significantly from the 12 percent the networks averaged last year.

Also read: How Netflix really did save the CW

More troubling for broadcasters, according to the ad trades, CW sold only 75 percent of its commercial inventory for the coming season, as opposed to nearly 80 percent last year. This puts total dollar volume for the network — jointly owned by CBS Corp. and Time Warner Inc. — at around $400 million to $420 million, flat with last year.

So if the other networks also report flat dollar volumes, as is expected, what will it mean? According to analysts, the willingness of advertisers to concede to price increases suggests they still see broadcast TV as a unique tool to reach a mass audience.

“Network TV remains a fixed starting point for TV plans, and will continue to serve this purpose for as long as it satisfies goals better than any alternative that may be tried,” wrote Pivotal research analyst Brian Wieser to investors. “Neither cable TV nor online video, nor other media yet provides sufficient credibility to accomplish this goal for the largest brands, even as incremental shares of marketers’ budgets shift to new platforms.”

Of course, that last part of Wieser’s statement is key. The fact that advertisers are unwilling to increase their total commitment to the sector suggests they’re holding back dollars for new digital video alternatives, which were aggressively showcased for advertisers earlier this spring by companies including Google and Yahoo at a series presentations called the NewFront.

In fact, speaking at the Nomura 2nd Annual U.S. Media & Telecom Summit in New York, Sarandos stopped just short of saying that Netflix’s four-year, $1 billion deal with the CW’s parents, Time Warner and CBS Corp, has saved the broadcast network from extinction.

“What’s important to note is that you look at programming at CW, Netflix license fees makes that content profitable,” he said. “Without it, it was struggling along.”

Did Netflix really save an entire broadcast network? Well, based on the just-released dire ratings data for CW from last season, the jury is still out on that. But as the network seeks to stabilize its linear TV ratings situation as it transitions itself into broadcast TV’s first true multi-platform programming institution, those Netflix dollars — as well as revenue culled from a separate streaming deal with Hulu Plus  — are proving pivotal.

Broadcast TV’s most innovative model

The CW targets a much narrower audience than the Big Four networks (ABC, CBS, Fox and NBC), primarily going after young women 18-34 with shows like Vampire Diaries and Heart of Dixie. But while its scale is much smaller, the network presents a very forward looking model for the television industry.

Simply put, CW’s audience is migrating to digital platforms at a faster rate than viewership for the Big Four networks. And CW is innovating its monetization strategy at a quicker pace as a result.

“Their demographic is much more cutting-edge, demanding and fickle,” noted Bill Carroll, a senior analyst for Katz Media, a firm which advises TV stations on programming decisions.

In fact, CW digital chief Rick Haskins told paidContent Tuesday that the network received 18 percent of its viewership during the just-completed 2011-12 TV season from digital platforms.

“When you’re bumping up on 20 percent of your viewing being someplace else, you’re model has to be different,” Haskins said.

For CW, that “different model” means limiting the differentiation between broadcast and streaming for both viewers and advertisers.

While Fox delays free streaming availability of its shows for eight days after initial linear airing, CW has cut that wait time down to just eight hours on its CWTV.com channel.

The CW has been putting full TV-like commercial loads into its streams for several years and pushes harder than any other network to integrate the sale of impressions on its digital platforms with those on its linear channel to advertisers.

While ratings have trended down for the network recently, ad sales have not. During last year’s upfront market, for example, the CW generated nearly $420 million in ad revenue, which was 10 percent year-over-year growth.

Having worked to create its own systems of measuring viewership across platforms for several years, network president Mark Pedowitz told advertisers during the CW upfront presentation two weeks ago that the company will soon introduce its own fully-baked cross-platform ratings system to the TV industry.

Almost in the same breath, Pedowitz touted a new digital studio that will specialize in low-cost, short-form digital content, extending the CW brand mobile platforms in a way no other network has attempted.

About those ratings…

But as the CW transitions into a next-generation, multi-platform video programmer, it can’t surrender the underpinnings of its traditional business model — drawing viewers to its affiliate broadcast stations, which still accounts for more than 80 percent of its viewership.

And right now, that part of the business isn’t going well.

On Friday, ratings tracker Nielsen revealed that for the just-completed 2011-12 TV season, CW’s primetime usage dipped 15 percent to an average of only around 1.5 million watchers. Viewership for the network’s target demographic, adults 18-34, dropped 20 percent to 800,000.

With ratings like these, how can the network’s affiliate partners survive, much less negotiate hefty retransmission fees with cable and satellite operators?

It is here where the Netflix licensing deal has helped tremendously, delivering the network — which had previously struggled to sell its shows to cable and syndication — back-end resources for the first time.

Rather than having to further cut back on the number of fresh, original programming it will supply to its affiliates next season — thus further dropping ratings — CW announced that it will have 50 additional hours of original series on the air next year and will be able to supply original programming during the summer for the first time.

“We’ve taken the money and put it back into supporting the model,” Haskins noted.

Here’s former CW president Dawn Ostroff discussing the Netflix deal with paidContent editor Staci Kramer last year:

Hulu Plus will be the only subscription service with in-season episodes; the five most recent shows will be available the day after broadcast. Ad-supported Hulu.com will have the five most recent shows eight days after air. But it’s not a full exclusive — the deal still allows for access via authentication by cable operators and CW will stream episodes on its own cwtv.com before they show up on Hulu.com.

Unlike the Netlfix deal, which focuses on scripted programming, Hulu will get America’s Next Top Model. Other shows include rookies Ringer, Hart of Dixie and The Secret Circle and veterans The Vampire Diaries, Supernatural, Nikita, 90210 and America’s Next Top Model.

CBS resisted invitations by original Hulu partners NBC (NSDQ: CMCSA) and Fox (NSDQ: NWS) to be an equity partner in the online video portal — ABC (NYSE: DIS) joined later — and only recently made a deal for library movies and TV shows to go to Hulu Japan.

Current-season shows will hit Netflix when the following season starts so don’t look for Ringer or Hart of Dixie until next fall. But past seasons of The Vampire Diaries, Gossip Girl, One Tree Hill and Nikita start Saturday, Oct. 15, with Supernatural and 90210 to follow in early 2012.

It’s a boost for Netflix, which is still struggling to shake off the after effects of a major price increase for half its customers and the ill-fated effort to spin DVDs into a new service called Qwikster. The network gets some 700 hours of youth-oriented programming to stream and vampire bragging rights.

For both CBS and Time Warner, it’s a master stroke in terms of The CW and their respective licensing strategies.

For CBS, it’s another dollop of vindication for being the only major broadcast network to stay away from Hulu (it has a library deal now with Hulu Japan) and avoiding deep online access for its shows — a strategy that is paying off as CEO Leslie Moonves and company slice and dice in the increasingly competitive streaming video area.

Time Warner has been patient about major deals. CEO Jeff Bewkes evangelized TV Everywhere but that didn’t mean TV immediately or that all deals would be the same. In this case, he told the NYT, Netflix made sense as a location for heavily serialized shows that might not fare well in syndication.”

As for CW, Moonves told the LA Times this one deal “essentially makes the CW a profitable enterprise.” From now through the deal, CW and its studio owners will be able to count on Netflix revenue that increases the value of the network through guaranteed payments for online access to its scripted dramas.

About that $1 billion figure that I’ve been told is right by multiple sources and too high by another: the answer is both. The full potential value is based on a number of variables that all have to be hit, much like an acquisition with a conditional earnout. The LAT says Netflix is paying in the neighborhood of $600,000 an episode for Gossip Girl with a varying scale for other shows.

More details in the release.