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Online Extra: ABC News Now: "We're Leapfrogging"


When David Westin became president of ABC News (DIS) in early 1997, ABC had already made what would prove to be a fateful decision. With the merger of CapCities/ABC and Disney nearing completion, the network dropped plans to spend $100 million to launch its own cable news network to take on CNN (TWX) -- and watched as upstart Fox News (NWS) became a huge money maker.

Now, Westin is back in the news-channel business with ABC News Now, a digital offering that includes a 24/7 channel and video-on-demand clips, both of which can be accessed from the Internet, cell phones, and even the new Sony (SNE) PlayStation Portable gaming device. Next up: another shot at a cable news channel as Disney's sales team starts peddling ABC News Now to cable and satellite operators, and even phone companies that are offering video.

Westin spoke with BusinessWeek Los Angeles Bureau Chief Ron Grover in early Aprilbout ABC's history and its digital future. Edited excerpts of their conversation follow:

Q: Why did ABC drop its plans to have an all-news cable channel back in the '90s?

A: It was about the resources at the time. But now we're leapfrogging [ahead of] Fox and CNN, I think.

They had a great idea back then -- a linear 24-hour channel that allowed consumers to get news around the clock. But with digital delivery, people want their news more and more customized. I see what we're doing as the next generation in news. Some people may want more news about the Pope than they're going to get on a linear channel like CNN, and we can give it to them. And we can do it on their cell phones, Internet, wherever they want it.

Q: Still, you're going to be in competition with CNN, Fox, and MSNBC (MSFT

and GE), who have great brand names and are going digital as well.

A: We think the ABC News brand is pretty strong, too. But we see this as a separate digital network that's very different from what they're doing. We will have 50 hours of monthly video-on-demand (VOD) segments that consumers can call up -- everything from 20/20 and Nightline to original programming.

Plus, we see working with our [more than 200] affiliates to provide local news as well, which isn't in any of those other news efforts.

Q: ABC and other networks have had sometimes prickly relationships with their affiliates. How tough will it be to get them on board?

A: I'm committed to getting that done. But when you're negotiating with 220 different companies with their own vision and their own complicated requests, it isn't easy. We hope to become partners with them financially, so that will doubt help.

Q: You're not on cable at the moment, although you had a brief trial last year with ABC News Now in several markets. What happened?

A: Frankly, we couldn't get paid. [The channel was placed on cable systems under the federal "retransmission" rules by which large TV programmers like ABC sometimes get sister cable channels onto systems in lieu of cash payments.] But we think our new ABC News Now channel will be something that cable operators will want, especially those who are hoping that video-on-demand will be a big selling point for them. Plus, we have the ABC cable team [which includes sports giant ESPN] helping to sell it to cable operators for us.

Q: How important is the video-on-demand component that you've expanded in the last year?

A: VOD is critical to the deal with the cable operators. If I'm a cable company with a certain level of bandwidth as I look to grow, I will want a lot of different content to entice the consumer to stay with me.

News when and how you want it is going to be a big seller, we think. The question is how much the cable operator wants to pay you for it.

Q: What's the business model?

A: We see this as two revenue streams -- advertising and subscription fees. Procter & Gamble (PG) is already on board. I can't tell you that we have a lot of them signed on yet, but it's early on. We'll get there.

And we see this as generating nice subscription revenues for us, both from the linear channel and the VOD. AOL and Yahoo! (YHOO) pay us revenues on a subscription basis already. And with their broadband pipes, we think that cable operators will, too. And we anticipate that Disney [and its cable sales team] can be a big catalyst for us as well.


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