‘Lost,’ ‘Housewives’ to be available on demand

updated 9:54 p.m. ET Feb. 25, 2008

LOS ANGELES - ABC said Monday it will release hit shows like “Lost” and “Desperate Housewives” for free over video-on-demand cable services, with the hitch that viewers will have to sit through commercials without being able to fast-forward.

The Walt Disney Co., parent company of the network, is aiming to profit from ads sold for the video-on-demand offerings while expanding its digital strategy beyond programs distributed on its Web site, abc.com.

“We’re trying to drive everyone back to television but very much understand that with everybody’s lifestyles, they can’t necessarily watch that way and we don’t want to lose them altogether,” Disney spokeswoman Karen Hobson said.

The announcement follows an agreement between ABC and its more than 200 affiliate stations around the country.

Affiliates had in the past limited the amount of content ABC could redistribute in nontraditional ways because of their concern about the ratings impact on stations. But the video-on-demand deal offers them a financial incentive to participate.

Under the deal, local affiliates will be able to sell one 30-second ad on the content, while ABC will sell from four to nine other commercials to national advertisers.

That amounts to two to five minutes of commercials for an hourlong program, compared with 17 minutes or more for a show on regular TV, Hobson said.

The agreement initially involves cable provider Cox Communications Inc., which has some 6 million subscribers, of which 3.1 million have digital set-top boxes that allow them to access video-on-demand services.

The deal follows a monthslong trial for Cox subscribers in Orange County. Some 93 percent of the users found the ads acceptable in exchange for the free service, the companies said.

Cox spokesman David Grabert said the customers mainly wanted more content.

“Anything we can do to bring greater convenience to our customers is better for us,” Grabert said.

It’s not the first time for a network to redistribute its shows for free over a cable company’s on-demand service.

CBS Corp. announced a deal with Comcast Corp. in November 2005 to offer previously aired shows on-demand. It even sold new ads for the repurposed content to corporate sponsors, such as to automaker General Motors Corp. for old episodes of “CSI.”

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NBC Universal, a joint venture of General Electric Co. and Vivendi Universal, cut a similar deal with Comcast in March 2006, selling some prime-time programs for 99 cents at midnight following their broadcast and offering others for free. (Msnbc.com is a joint venture between Microsoft and NBC Universal.)

ABC signed an on-demand deal with Comcast in November 2006 but limited its deal to seven markets that were both served by Comcast and had stations that were owned and operated by the ABC network. Monday’s announcement would expand the on-demand offerings across the country.

Comcast, with 24.1 million subscribers, including 15.2 million who can access on-demand services, said its on-demand offerings have helped reduce its churn rate, or the percentage of customers who drop or downgrade service after purchasing it.

“What we’ve seen is that the churn rate is cut in half when the customer subscribes to digital cable,” said Comcast spokeswoman Jenni Moyer. “When that customer uses on-demand that churn rate gets cut in half again.”

Such aftermarket resales of content are becoming a larger revenue stream for show creators like Disney, said Global Crown Capital analyst Martin Pyykkonen.

He expected that within a few years, such digital strategies would reach 5 percent of Disney’s revenue, which topped $35.5 billion last fiscal year, at a relatively low cost.

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