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Online TV: This Is a Test
(Newsbytes Via Thomson Dialog NewsEdge)Most newspapers offer free versions online. So do radio stations. Now, television is making a run at putting its programs online for free -- and testing whether consumer behavior and advertising dollars will follow.
Walt Disney Co. yesterday announced it will make four of its most popular programs, including ABC's "Lost" and "Desperate Housewives," viewable online free for two months, taking the next big step in the evolution of television over the Internet.
The transformative power of Internet television has become clear in the past several months, as companies offer more options for searching, buying and watching television online. Although Disney's isn't the first foray into free video content, it's one of the most expansive tests of how the television business might adapt to a Web-based future.
"It's really an opportunity for us to learn a little bit more about a different model and see how our consumers use it," Anne Sweeney, president of the Disney-ABC Television Group, said as part of a panel at the National Cable Television Association's annual trade show in Atlanta. Advertisers will also be able to experiment with online ads, she said. "It's about recognizing that none of us can live in a world . . . of just one business model. This is about how the consumer is going to use all of this technology."
If successful, Disney may launch a more permanent version of the service by the end of the year, ABC spokeswoman Karen Hobson said.
For companies such as Disney, having an online outlet is about trying to capitalize on growth in Internet advertising, which so far is not nearly as lucrative as television ads. For viewers with high-speed Internet connections, it means greater control over their relationship to the television and with advertisers. Over time, greater options for online television could give consumers a meaningful alternative to cable and other paid television services.
But offering free programming directly to the consumer over the Internet may threaten to cannibalize the existing television business, analysts said. Network affiliates, which have traditionally cut deals with programmers to distribute content in regional television markets, will have to find ways of hanging on to their local audiences. Over time, consumers may discover ways of circumventing cable, satellite and Internet television services like Verizon Communications Inc.'s Fios by simply downloading their favorite shows off the Web for free, instead of paying monthly subscriptions for multiple channels.
"This probably makes the trend toward online video irreversible," said Phil Leigh, an analyst with research firm Inside Digital Media Inc. "This is a new medium, and it is going to take over. Eventually, we'll get all of our video off the Internet, the way we get most of our text online now."
Telecommunications companies and cable companies said yesterday that online offerings such as Disney's won't threaten their television businesses because consumers still want packages of channels that offer a vast array of shows to watch at any moment.
"It's a different experience," said Eric Rabe, a spokesman for Verizon.
Verizon and AT&T Inc. are investing billions of dollars in new, faster networks that will allow them to sell Internet-based television to customers as an alternative to cable companies. By managing their networks, and controlling the quality and speed of what travels over their own network, they will be able to deliver higher quality services than what travels over the conventional public Internet, they said.
By wading into Internet television, Disney may be entering a major regulatory debate over whether providers such as Verizon or AT&T should be allowed to wield control over quality of service on the Internet -- or seek payment for giving priority to one company's Internet traffic over another's, said Blair Levin, an analyst with Stifel, Nicolaus & Co.
Major Internet content companies such as Google Inc., Yahoo Inc., Amazon.com Inc. and eBay Inc. are seeking rules on Capitol Hill to prohibit cable and phone companies from picking who gets priority treatment, but Disney chief executive Robert Iger last month said he thought such rules were unnecessary.
In December, CBS launched a similar test, offering some of its shows for free on Yahoo's Web site, and last fall, Google Video offered free episodes of UPN's "Everybody Hates Chris."
Disney, the nation's second-largest media company, is making four shows -- including "Alias" and "Commander in Chief" -- available in streaming video on the ABC Web site, starting May 1 through the end of June. The shows will be available the day after airing and will be archived on the site. In February, Disney announced it would offer some kids' programming, including "The Suite Life of Zack & Cody" and "Mighty Morphin Power Rangers," online for free later this spring.
These programs will test consumers' tolerance for watching Internet video ads -- something that can be avoided by viewers who use digital recorders such as TiVo or who buy programming from iTunes or other online media stores.
Disney said its online advertising -- which will include ads from AT&T, Cingular Wireless LLC, Ford Motor Co., Procter & Gamble Co. and Toyota Motor Corp., among others -- will be targeted to the consumer's income, needs and interests. The ads will be more interactive and will ask consumers to click on the car ad they are most interesting in watching, for example, or will offer product-sponsored games.
Jack Perry, president and chief executive of Decisionmark Corp., said his company has already developed technology to help identify an online television viewer's location, to help broadcasters, network affiliates and advertisers better target their ads.
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