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ABC to offer shows for free online
Cable TV executives react cautiously, but analysts see looming threat to industry
By Keith Reed, Globe Staff | April 11, 2006
ATLANTA -- Cable industry leaders reacted cautiously yesterday to the disclosure by Walt Disney Co.'s ABC that it would offer free reruns of its prime-time hits over the Internet beginning the day after they air, testing a model for delivering programming to viewers that bypasses the cable providers.
Disney described the effort as a two-month test, but it could pose problems for the cable TV companies, which for years have been the gatekeepers between TV programmers and viewers.
''Going direct over a broadband connection is a very smart business, and I think you'll see other broadcasters follow suit," said Rich Greenfield, an analyst at Pali Research.
ABC plans to put episodes of ''Lost," ''Desperate Housewives," ''Alias," and ''Commander-in-Chief" -- four of its most popular shows -- on the Internet in May and June. Viewers will be able to watch for free beginning the day after they air; the episodes will be archived so viewers can watch any shows they miss.
ABC's trial will allow viewers to visit its website and play full episodes of the shows, with the ability to fast forward, pause, and rewind. But viewers won't be able to fast forward through commercials. The network has already enlisted 10 advertisers for the trial, including AT&T Inc. and Ford Motor Co.
A look at the ABC shows to be offered online
Cable TV executives at the annual National Cable and Telecommunications Association convention sought to put the best face on the day's news, suggesting that Disney's plan could drive demand for the high-speed Internet connections that the cable companies provide.
''From a cable provider's perspective, what a great opportunity," said John R. Alchin, Comcast's co-chief financial officer. Alchin also said that a desire for more video over the Net could drive demand for even faster Internet services.
A Disney spokeswoman called her company's move an ''additive" to the distribution it already has on cable and broadcast television. ''We're working to look at different ways to work with our affiliates on this," Karen Hobson said. ''This is just the latest experiment we're doing with how we make our programs available."
Some analysts warned that Apple, which sells episodes of popular ABC shows for download to iTunes, could suffer from the free distribution of ABC programming over the Internet. And it could hurt ABC's local affiliates, whose ratings and advertising rates are based on how many people watch shows at a scheduled time.
''The ones most threatened are local [television] stations and then the cable operators," said Brad Adgate, senior vice president of research at media buyer Horizon Media. ''How much opportunity is there for local retailers to advertise?"
Anne Sweeney, president of Disney-ABC Television Group, told a panel discussion at the cable show that the online offerings are designed to attract more viewers to the shows, not to cannibalize viewers from ABC and its affiliates.
''I think you'll see these models co-exist," Sweeney said. ''None of us can live in a world of just one business model."
Two top cable executives appeared with Sweeney on the panel and cast ABC's decision in a good light, saying they view it as part of the industry's effort to capture new audiences amid fiercer competition with the Internet, video games, and digital downloads. Comcast Corp. CEO Brian Roberts and Time Warner Inc. chief executive Richard Parsons both spoke of how ABC's online trial and other initiatives will ''grow the pie" of viewership.
Shares of Walt Disney rose 26 cents to close at $27.79 on the New York Stock Exchange. That is closer to the higher end of its 52-week range of $22.89 to $28.85.
Analyst Patti Reali agreed that cable could ultimately capitalize on Disney's plan, but she wouldn't rule out that the Internet would instead become a fierce competitor for eyeballs and ad dollars.
Right now, she said, people 40 and older, who still hold sway over how media are consumed, may tend to favor cable for watching TV.
But like Reali's 13-year-old daughter, many kids spend more time in front of their computers or staring at cellphone screens than they do in front of the television.
''The issue is who's paying the bill and who's really buying the content," said Reali, research director for Gartner Research in Delran, N.J. ''When these kids are starting to actually pay their own bills, are they sitting in front of a TV or somewhere else?" Reali said.
''This is a 7- to 10-year process. The question is, is there a tipping point?"
Material from Globe wire services was used in this report. Keith Reed can be reached at
reed@globe.com.
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