Disney / ABC to offering some prime-time shows episodes online for free

This is exactly what should be happening. See the WSJ article link here or, if no subscription, see it pasted below. With Disney/ABC's venture people can watch tv shows at their leisure on the net, but are forced to view the commercials. I am surprised it took this long for anyone to break into this idea. One negative to all this is that tivo is going to get crunched pretty bad if others networks follow. Why use tivo when you can watch it all online at your leisure anyway?

Disney Will Offer
Many TV Shows
Free on the Web

ABC's Prime-Time Hits
And Zap-Proof Commercials
Are Pillars of Bold Strategy

By BROOKS BARNES
April 10, 2006; Page A1

Walt Disney Co. plans to make much of its newest and most popular programming on ABC and other channels available free anytime on the Web, in a move that could speed the transformation of television viewing habits and help revive the struggling TV advertising business.

On April 30, ABC will unveil a revamped Web site that will include a "theater" where people with broadband connections can watch free episodes of "Desperate Housewives," "Lost" and other hit shows on their computers. Episodes will be available the morning after they air and will be archived so people can eventually view a whole season. A Disney Channel version with five shows will start in June, and an ABC Family version is also planned. Disney's Soapnet cable channel will start offering programs free on its Web site, Soapnetic, on April 17.

Episodes of the ABC shows -- which can be paused, rewound and fast-forwarded -- will contain commercial breaks that viewers can't skip, making Disney hopeful it has figured out a way to turn the delivery of programs over the Web into a profit-generating business. Ten advertisers, including Ford Motor Co., Procter & Gamble, Universal Pictures and Unilever, already have signed up.

The initiative, to be announced today by Anne Sweeney, president of the Disney-ABC Television Group, marks a watershed: the first time a TV company is offering major prime-time shows free online without restriction. Until now, networks have brokered limited piecemeal deals in a bid to keep business partners happy and their traditional business models intact. CBS Corp. has come the closest to what Disney is planning, offering rentals of "Survivor" episodes on CBS.com for 99 cents.

But so far, none of the other big TV networks have hinted at plans comparable to ABC's. The strategy at CBS is to make its TV shows available on as many platforms as possible -- including cellphones -- while General Electric Co.'s NBC Universal is developing unique programming for the Internet. News Corp.'s Fox is seeking to move shows online in a way that shares revenue with affiliates.

Nearly anyone with a computer and a broadband connection will be able to watch Disney's TV offerings online. Still, Disney is putting such a huge volume of programming online that some analysts say it could spur sales of media-rich computers, as well as devices that transmit Internet content to be watched on most types of TV sets. "All this area needs to explode is enough top-notch content," says Brad Adgate, senior vice president at Horizon Media, a New York consulting firm.

Online streaming -- the technology of broadcasting video programming over the Web -- has been an area of great untapped potential for the TV industry. The possibilities were underscored by the success of CBS's online streaming of the NCAA basketball tournament in recent weeks. The "cable bypass," as CBS Chief Executive Leslie Moonves calls it, could have dire implications for cable and satellite purveyors because it has the potential to cut off the revenue they receive for delivering programming. Making shows available online also could undercut the on-demand services cable operators are rolling out.

The ABC initiative reflects a sharp turnaround at Disney's television unit. Two years ago, ABC was the last-place network, and cable properties such as ABC Family were in a slump. Then Chief Executive Robert Iger, who has become unexpectedly aggressive in digital media, grouped all of the company's TV units under one umbrella.

Disney's Ms. Sweeney installed a new management team and streamlined operations from creative development to marketing and publicity. The result has been the launch of monster hits across the division, from "Grey's Anatomy" on ABC to the Disney Channel's "High School Musical." Just two new shows -- "Desperate Housewives" and "Lost" -- are expected to generate $1 billion in syndication revenue over the next five years.

The group has also emerged as the leader of the TV pack in digital media. Disney was the first to offer both broadcast and cable shows for download on iPods, cutting a deal with Apple Computer Inc. in just three days last fall.

"It would have required excruciating coordination before the merger," Ms. Sweeney says. "When you take down the walls and everybody on the team is living in the same world, things can happen quickly."

Offering so much content online will probably ruffle some feathers. ABC affiliates, long accustomed to exclusive broadcast rights to new shows, are already griping that they don't profit from the network's deal with Apple. It could also fuel a fight with Hollywood unions, which are starting to talk strike over how artists are compensated as the networks' business models evolve.

Other networks and studios with more conservative philosophies about opening their film and TV vaults might feel pressured to emulate Disney. Apple, by contrast, is unlikely to feel much of a threat because consumers won't be able to download the free programs onto portable devices.

Though Disney doesn't believe offering shows online will undercut DVD sales, big retail partners such as Wal-Mart Stores Inc. may argue otherwise. Disney's strategy also includes eventually offering permanent downloads. Albert Cheng, executive vice president of digital media for the Disney-ABC Television Group, says the company is exploring allowing viewers to download shows for various fees. For example, a show with no ads might cost $1.99, while a show with fewer ads might cost 99 cents.

Disney refers to the ABC.com launch on April 30 as a test, starting with a handful of programs, including "Alias," "Commander in Chief," and "Lost," eventually expanding the menu.

As part of an effort to engage the online community, viewers from around the country will be able to gather in "rooms" online to watch an episode of, say, "Lost" and chat about it. Disney will also promote the creation of fan sites for various shows. "We want to tie all of these fan sites closer to our brand," Mr. Cheng says.

The ads won't look like typical TV commercials. For starters, instead of five commercial breaks during an hourlong episode, there will be three breaks lasting a minimum of one minute each -- all of them from the same advertiser. Mike Shaw, ABC's president of sales, says viewers will have a choice of what type of ad to watch -- for instance, a traditional video commercial or an interactive "game" commercial.

Mr. Cheng says the company is looking for ways to give affiliates a piece of the action. "Do we share ads? Do we try and push traffic to each other's Web sites? We just haven't nailed down the right formula for that yet," he says.

Key to Disney's online TV strategy is to keep tight control of programs, which rules out partnerships with companies such as Google Inc. that are moving into video on demand. Disney's decision to manage streaming of its programming was reinforced when Google had technical trouble when first offering episodes of CBS's "CSI: Crime Scene Investigation" for rental in January.

"The worst thing you can do is put up one of your great franchises and then have the technology not work and your viewers frustrated," Ms. Sweeney says. CBS has said it considers the experiment to be a low-risk success.

While its ABC hits have the highest profile, Disney wanted to move quickly with Disney Channel and Soapnet offerings, too, because both cable networks have been sizzling of late.

"High School Musical," an original Disney Channel movie that premiered in January, has given the network the best ratings in its 23-year history. Five series will be available in the DisneyChannel.com "theater" at launch, including "Power Rangers" and "Kim Possible."

Soapnetic, the soon-to-launch streaming portal for Soapnet, will offer "I Want to be a Soap Star" and portions of nine soaps, including "Days of Our Lives" and "General Hospital." Deborah Blackwell, general manager of the channel, says offering soaps online is partly aimed at a "huge audience" -- until now, untapped -- of office workers.

Write to Brooks Barnes at brooks.barnes@wsj.com