Walt Disney Co. (DIS:US)’s ABC network, staking a claim to growth in online video ads, will brief advertisers next week on a service providing live shows on mobile phones and tablets, people with knowledge of the plan said.
Watch ABC, a first-of-its-kind application from a broadcaster, will stream live and archived shows to pay-TV subscribers, said the people, who sought anonymity because the plans aren’t public. It could be released near the new TV season in September, they said.
With online video ad sales growing faster than network TV revenue, Disney and other programmers such as News Corp.’s Fox are developing ways to let audiences watch away from home on smartphones and products such as Apple Inc.’s iPad. The move pits entertainment companies against Google Inc. (GOOG:US)’s YouTube and Facebook Inc. (FB:US) for an ad market that Morgan Stanley (MS:US) predicts will grow 18 percent to $2.73 billion this year.
“While the audience online is still small, it’s growing fast and represents one of the biggest opportunities for the media companies,” Ben Swinburne, a Morgan Stanley analyst in New York, said in an interview.
As with Watch ESPN, the mobile TV service offered by Burbank, California-based Disney’s sports channel, Watch ABC represents a potential new revenue source. The network will outline the product to advertisers in New York next week during upfront sales presentations for the September 2013 TV season.
“We’re already talking as it relates to ABC and the upfronts of selling packages to advertisers that go across all media,” Disney Chief Executive Officer Robert Iger said May 7 on a conference call.
Disney rose 0.9 percent to $66.58 in New York, another all-time closing high. The stock has advanced 34 percent this year, second most in the Dow Jones Industrial Average (INDU), which is up 15 percent.
Broadcast networks will receive about $9.18 billion in advance ad commitments, a 1.2 percent increase from a year ago, Swinburne wrote in an April 25 report. Cable programmers will get $10.7 billion, a 6 percent gain, he wrote.
All four major broadcast networks offer some programming on computers, tablets and smartphones. Later this year, Fox plans to release Fox Now, an app giving pay-TV viewers expanded on-demand access to recent shows. News Corp. is releasing similar apps for F/X, Fox Sports and NatGeo, said Mike Hopkins, president of distribution for Fox Networks Group.
Live streaming will come later, he said in an interview.
CBS Corp. (CBS:US)’s TV network and Comcast Corp.’s NBC have released ad-supported apps that don’t require viewers to have a pay-TV subscription, like an earlier version of ABC’s product. The apps offer access to some archived programs.
CBS last month acquired a stake in Syncbak, a company that works with local stations to stream their shows online.
Such services could head off the challenge posed by Aereo Inc., which captures broadcasters’ over-the-air signals and retransmits them to subscribers on tablets and smartphones.
ABC’s step marks the biggest effort yet by a broadcaster to capture the nation’s 101 million pay-TV subscribers while they’re away from the living-room set and more apt to be posting on Facebook or watching a YouTube video.
The network’s “Modern Family” and “Grey’s Anatomy” draw viewers that advertisers want, unlike the user-generated, low-budget clips on YouTube, Swinburne wrote.
“Much of the YouTube inventory is not attractive for traditional brand advertising,” he wrote.
With the Watch ABC app, a cable subscriber will be able to view programs on the road or in a room where there’s no TV, as long as there’s a Web connection. The service can provide travelers access to their local ABC station from anywhere.
By limiting the service to pay TV customers, it puts mobile access behind a paywall and protects the fees that the network’s eight owned stations and many affiliate broadcasters collect from services like Comcast Corp. (CMCSA:US) and DirecTV. (DTV:US)
“They’re creating something viewers want and creating a new revenue stream,” said Jay Baum, executive vice president and director of national broadcast buying for the advertising company Deutsch, whose clients include DirecTV and PNC Bank.
Last June, Disney released Watch Disney Channel, which lets pay TV viewers with a mobile device see a live feed of the cable network and archived shows. Disney Channel applications, including ones for Disney XD and Disney Junior, have been downloaded more than 13 million times, according to the company. The existing ABC Player, introduced in 2010, has been downloaded about 10 million times. Unlike the new product, it doesn’t offer live TV or as extensive library access.
One challenge facing all of the programmers, cable and broadcast, is measuring online audiences and demonstrating to marketers that they are reaching the viewers they expect.
Currently the ratings distributor Nielsen only counts online audiences for a show when it’s seen within three days of its original airdate and only when the commercials are the same.
That excludes later viewing on digital video recorders, on a TV network’s website or on Hulu.com, the ad-supported site owned by Disney, News Corp. (NWSA:US) and Comcast’s NBC Universal.
In next week’s meetings with advertisers, Disney will outline plans to use Nielsen’s online campaign ratings, a system for counting Internet audiences, Swinburne said.
“The key is to get a measurement system in place that allows us to monetize, because I’m convinced there’s a lot of consumption going on there,” Iger said on the call.
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