Disney not afraid of big bad internet

The Walt Disney Co. Chairman and CEO Robert Iger wants everyone to know that he watched this week's episode of ABC's "Desperate Housewives" not on a television, but via computer on ABC.com.

And in case there were any doubts about his commitment to rapidly emerging media platforms, Iger also added he really enjoyed a Tylenol spot that played during a commercial break that included some unique online elements.

"As we see it, this is not an experiment," Iger said while reporting Disney's robust second-quarter earnings earlier this week. "We're in this for the long run."

David Miller, managing director and media manager of Sanders Morris Harris in Los Angeles, said Iger is sending an important message to Wall Street that he is not afraid of new technology.

"Every time you have seen a shift in technology, you tend to see a lot of paranoia with regard to how those business models will play out," Miller said. "When TV began in the '40s and '50s, people thought it was the end of radio. When the VCR came to the market in the late '70s, they thought it was the end of the theatrical movie business. So here we go again and I think what Disney is trying to convey is that this can increase earnings."

Disney Chief Financial Officer Thomas Staggs said the company expects digital earnings to generate $500 million in revenue during the current fiscal year from paid content and online advertising.

Other media companies, including Time-Warner, Viacom and NBC Universal have also recently begun delving into wireless and online platforms to distribute their programming.

Last week, Viacom-owned CBS announced the launch of branded broadband channel relying on a mix of Web-created shows and CBS network-related content including "Beyond Survivor," while Warner Bros. on Monday said it will use peer-to-peer technology developed by BitTorrent to distribute its films and television shows over the Internet beginning sometime this summer.

But Disney has been at the forefront of new platforms and Iger the most vocal advocate.

"He has to distance himself from the (former CEO Michael) Eisner years and one of the things he has hit upon has been new technologies," said media analyst Dennis McAlpine. "Does it add anything to the bottom line now? Probably not. But this establishes him as a spokesman in this area."

This month and next, ABC.com is offering some of the Disney-owned broadcast networks' shows for free, with commercials, including "Housewives," "Lost" and "Alias." The online trial is expected to continue after that possibly with other free shows and some paid content.

"We are already showing you a glimpse of the future, which we've pretty quickly made the present," Iger said Tuesday.

The online trial came after Disney made commercial-free episodes of some of its shows available for downloading, for a fee, on Apple Computer's iTunes last fall. Iger said there have been more than 5 million downloads of the ABC shows since October.

NBC Universal, Fox and CBS followed ABC's lead in making some of their shows available for download on iTunes for $1.99 per download.

Still to be determined is what kind of impact these services will have on television ratings or whether they will devalue reruns of the programs.

"I doubt the impact will be that strong but they are sure to be ticking off some affiliates and they will likely come to some appeasement," McAlpine said.


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