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A Second Chance For ABC News


As a news event, it hardly compared to the capture of Saddam Hussein. But in January, just weeks after she was caught lip-syncing on Saturday Night Live, pop singer Ashlee Simpson took the stage at the Orange Bowl and was promptly booed by the crowd of 72,000. The halftime spectacle, broadcast live on ABC, became an Internet classic: Within days a 34-second video clip of the incident posted on the ABC News Now site had been played nearly 1 million times. That gave Walt Disney Co.'s fledgling news site a boost in the bruising battle with its rivals. "We were a hot commodity among a lot of younger viewers, the kind of audience that TV programmers want to reach," says David Westin, president of ABC News.

Hurrah for second acts. A decade ago, ABC missed out on the explosion of cable news by opting out of spending millions to challenge CNN, and then watched Rupert Murdoch's Fox News go from upstart to national obsession. Now the onetime laggard is emerging as a leading innovator on the Web, with the launch of a Net news service designed to steal a march on the big boys. ABC News Now offers up 24/7 programming, including Web-only shows like Sam Donaldson's Politics Live. It also has video clips that Web surfers can watch whenever they want, of everything from Cokie Roberts' tour of the Pope's apartment to a report on how drugs can delay Alzheimer's.

NO WAITING

Chalk it up as a sign that video on the Net is coming of age. While niche sites have been around for years, the aggressive push by a network operation highlights the growing numbers turning to their PCs for TV-like programming. One key reason: Broadband is hitting critical mass. Today an estimated 36 million U.S. homes have superfast Net connections. Another factor: People want more flexibility in how they get information. Rather than having to sit in front of the tube at 7 p.m., most viewers want the option of watching anytime, from anywhere there's a Net connection.

ABC News isn't alone in rushing into this new world. CNN is expected to unveil its own broadband news channel by the end of the summer, while Fox News and MSNBC offer video clips on their Web sites and other programming on cell phones. But no one is chasing viewers as hard as ABC. It has signed deals with the online services AOL (TWX) and SBC Yahoo!, wireless-operator Sprint (FON), and others, giving it an estimated 30 million viewers for its broadband channel. It also has developed technology so that its clips can be delivered to PCs, cell phones, and even Sony Corp.'s (SNE) new PSP game device. "It's part of our strategy to be everywhere someone has a screen to watch news," says Bernard Gershon, general manager of ABC News's Digital Media Group.

Innovative? Sure. But ABC has to be. Because it missed out on the cable boom, it's playing catch up in squeezing profits out of its news operations. CNN pulled in $337 million in operating profits last year, and Fox News $274 million, according to estimates from Kagan Research LLC. Meanwhile, ABC News Now isn't breaking even yet. To get there, it hopes to attract more advertising and get its programming picked up on cable or satellite.

Still, ABC's broadband push is a bet on the future -- and the young. While the average TV news viewer is around 60, a much younger audience is tuning in to the Web. More than 67% of those who use the Net for news are under 50, and 36% are under 30, according to the Pew Research Center for the People & the Press. And just about all American teens seem to have cell phones, making them targets for pop-culture news such as ABC's recent report on Britney Spears's pregnancy. "Fewer people are sitting on their couches watching news, but everyone has a cell phone with a free half-hour," says Robin Koval, chief marketing officer for ad agency Kaplan Thaler Group (PUB).

The initiative is no high-stakes bet. ABC launched its broadband channel in 2003 to cover the Iraqi invasion, and expanded it to 24-hour programming last year for the Presidential election, at the request of anchor Peter Jennings. The startup costs have been only $7 million, and annual operating expenses should run about $10 million. ABC keeps costs contained by using its existing news-gathering resources, along with lower-priced anchors such as former CNET Networks Inc. (CNET) reporter Hari Sreenivasan and onetime business reporter Gigi Stone.

It doesn't rely solely on ABC programming, however. The broadband channel offers original shows on fitness, politics, and Wall Street, as well as programs tailored to younger viewers, like the celebrity news show Tattle Tales. Its Stump Sam and Ask George provide short clips from ABC stars Sam Donaldson and George Stephanopoulos. Altogether, about 40 minutes of each hour is broadband-only content.

The heavy dose of original content seems to be helping. Although ABC won't break out traffic for ABC News Now, all the ABC News's online offerings attracted 7 million unique visitors in March, up from virtually nothing two years ago, according to researcher comScore Media Matrix. Still, that's far short of MSNBC's 27 million visitors and CNN's 23 million.

Although ABC executives won't disclose revenues for the startup, it already has had some broadband-size hits. AOL reported 2.5 million video streams of ABC's coverage of last year's Democratic National Convention, while 300,0000 followed coverage of the Asian tsunami in January. ABC News may have blown its chance for cable stardom. But it has the beginnings of a comeback on the Net.

By Ronald Grover in Los Angeles


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