Cable 'Lost’ In Disney Plans

Author:
Updated:
Original:

Cable operators seemed divided over whether The Walt Disney Co.’s decision to offer several hit TV shows online for free, ranging from ABC’s Lost to Disney Channel’s That’s So Raven, would ultimately hurt or help their business.

Disney’s announcement last week — that it plans to offer video-streamed replays of four ABC primetime hits on ABC.com, shortly after they air, as part of a two-month experiment — coincided with the start of National Show in Atlanta, the cable industry’s biggest convention. The news was the talk of the show.

The immediate question was whether Disney’s latest content-distribution play — streaming popular programming for free, supported by ads that online viewers can’t skip past — posed a threat to cable operators’ own on-demand offerings.

POTENTIAL IMPACT

With shows like Lost, Alias, Desperate Housewives and Commander in Chief, Disney’s Web site could potentially draw ad dollars and viewers away from cable’s on-demand offerings. If the test becomes permanent, the streaming could also adversely impact viewership for syndication, like the reairing of Desperate Housewives episodes on Lifetime Television later this year.

Disney maintained that its Web offering will help drive and promote cable operators’ broadband services, as well as thwart piracy of the Mouse House’s content.

The potential impact on VOD wasn’t the only issue that Disney’s Internet trial raised. For some cable operators, it is yet another example of programmers giving away content that distributors must pay for.

Time Warner Cable’s programming chief, executive vice president Fred Dressler, used the show as a bully pulpit to publicly question why his company should be asked to compensate Disney for retransmission consent for its owned-and-operated ABC stations — or pay license fees for Disney Channel — when consumers will be able to see shows from both those outlets for free online.

Dressler wasn’t the only distributor to take this position.

“We wholeheartedly agree with Mr. Dressler,” said Dan Fawcett, DirecTV Inc.’s executive vice president of programming acquisition.

Italia Weinand Commisso, senior vice president of programming for Mediacom Communications Corp., called Disney’s video-broadband plans “slicing and dicing” programming that’s on broadcast or cable, then putting in on another platform.

“And the question is when do I stop paying for all of this — me, the cable operator — if you’re going to keep doing all that stuff?” she said.

DISNEY’S HAD DISPUTES

Retransmission consent and the high license-fee rates for services like Disney Channel and ESPN have been touchy issues between Disney and its cable distributors, who over the years have had a rocky history.

But Disney is hardly the only media giant looking to put hit primetime shows from its broadcast network on new-media platforms like the Internet. Just days after Disney unveiled its plans, Fox did a deal with its TV-station affiliates that permits the News Corp. unit to vastly increase the amount of primetime programming — 60% this year — that can be reaired on nonlinear platforms. The stations will get a 12.5% cut of the revenue generated.

At the National Show, several of cable’s top executives — namely Comcast Corp. CEO Brian Roberts and Time Warner Inc. CEO Richard Parsons — downplayed the impact that the ABC Internet experiment would have on cable VOD.

“The more the consumer gets used to using on-demand, whether it’s on the PC or the TV, it’s good for us,” Brian Roberts said at a press conference after the show’s general session last Monday. “It’s our platform. We are delivering it to that PC, we’re delivering it to on-demand on the TV.”

At that same press conference, Parsons said, “This is the direction that the cable platform is going.”

Parsons also doesn’t see the Disney Internet deal as a means for the programmer to bypass cable operators. “I don’t think that an end-around of the whole cable platform is conceivable,” he said.

But Tim Hanlon, senior vice president of Denuo, a Publicis Groupe consulting firm, believes cable operators are taking a “myopic viewpoint” and have “an incumbent mentality” about the challenges they face. He characterized the Disney Internet deal as part of the continuing erosion of cable and broadcast’s dominance as content controllers.

“Gone are the days when the almighty TV station or the almighty cable operator dictates how things get distributed,” Hanlon said.

VOD DATA ISSUES

Madison Avenue has been frustrated by cable’s slowness to provide data detailing usage of on-demand, which has made some advertisers reluctant to run spots via the medium.

In contrast, Disney’s Internet experiment, in May and June, is very advertiser-focused. The company signed up 10 sponsors, including Procter & Gamble, to test broadband ad models and interactive video advertisements.

As far as Hanlon is concerned, Disney’s online offering — and its willingness to work closely with advertisers — gives it a big head start over cable VOD in the ad-sales arena.

“I fear that by the time the cable operators finally, finally get their act together when it comes to advertising in VOD, it’s going to be too late,” Hanlon said. “The world’s going to already have moved to an IP-video delivery system, which is much more open than a closed VOD system.”

Back in February, Disney announced that in the early summer, episodes of shows from Disney Channel and Toon Disney’s “Jetix” action-adventure block, such as Kim Possible and Power Rangers, would be available for free on Disneychannel.com and Jetix.tv.

While Disney Channel doesn’t carry traditional commercials, when its shows run online advertisers will be able to stream a limited amount of full-length spots.

One cable operator questioned why Disney, so adamant about not running commercials on the linear Disney Channel, was permitting them within shows like The Suite Life of Zack & Cody on the Web.

Disney officials last week tried to allay cable-operator concerns about its video-broadband play.

Albert Cheng, executive vice president of digital media for Disney-ABC Television, said the offerings actually help promote the industry’s cable television service, as well as its broadband offerings.

“People have to remember that this is a tiny percent of programming and it is driving more marketing power than anything, and enhances the value proposition of what we’re delivering to their services such as high-speed Internet,” Cheng said. “They’re giving something to their customers that they want to buy, so everything we do is adding value to those existing relationships.”

TESTING ON THE WEB

He said Disney chose the Internet over cable video-on-demand because broadband provides more flexibility and quicker results than operator-run VOD services. “The greatest thing about the Internet is that you get to test things out almost immediately and the lessons we get from that we can apply to VOD on cable,” Cheng said.

He also hopes the video-broadband offerings will stave off potential Internet piracy of Disney product.

“The content providers are not the ones providing high-speed Internet penetration, so I don’t think anyone can blame us for trying to make a commercial-able option [on the Internet],” Cheng said. “We have to protect our intellectual properties.”

Agreeing with Cheng, Insight Communications CEO Michael Willner said Disney’s approach was in sync with efforts to boost ad-supported on-demand programming. “If they can make a VOD strategy work on an advertising model, that’s OK with me,” he said. “They’ll be coming to me anyway, soon enough.”

Mike Farrell and Kent Gibbons contributed to this story.

Related