ESPN to Web Simulcast, Make Pay TV Online Gatekeeper

Bloomberg Oct 15, 2010

Walt Disney Co.’s ESPN will begin streaming its sports channels online to Time Warner Cable Inc. customers as soon as Oct. 25, part of the pay-TV industry’s strategy to fend off Internet competitors.

Time Warner Cable customers with ESPN will be able to watch on computers with Web access, John Kosner, general manager of digital media at the Bristol, Connecticut-based sports network, said in an interview. Service on mobile devices is also planned.

With the move, ESPN gives Time Warner Cable subscribers online access to its channels at no additional cost. ESPN is backing the cable industry’s push to extend programs to the Web and combat the loss of viewers to companies such as Netflix Inc. As the network shifts to “TV Everywhere,” will make fewer videos available to users of its services who don’t subscribe to Time Warner Cable, Kosner said.

“We believe this ‘TV Everywhere’ model is going to be what the industry at large is going to pursue,” Kosner said. “We’re going to make similar deals with lots of distributors.”

For the first time, programs such as “SportsCenter,” archived shows and live feeds of the channels will be available at to Time Warner Cable customers with verification, Kosner said. Some videos, including game highlights, will stay on the free portion of the website, he said. Cable networks are Disney’s biggest profit contributor.

People will be less likely to end their cable service if they’re able to get TV shows online at no additional cost, said David Bank, an analyst at RBC Capital Markets in New York.

‘Cord-Cutting Defense’

“This is exactly what they need to be doing,” Bank said in an interview. “This is the most logical cord-cutting defense they could take.”

Disney and New York-based Verizon Communications Inc. said on Oct. 7 that Verizon’s FiOS television customers will also gain online access to ESPN, which reaches 100.7 million homes, according to SNL Kagan. Disney and Time Warner Cable, also based in New York, announced their accord on Sept. 2.

The world’s largest media company is approaching TV Everywhere with three priorities, Disney Chief Financial Officer Jay Rasulo said at a Sept. 16 investor conference. The company will agree if it’s compensated fairly, can continue selling directly to consumers and doesn’t hurt existing businesses.

“We believe that at the end of the day, the consumer is going to want portability, the consumer is going to want access on their own terms,” Rasulo said. “We think they’ll be willing to pay for that, because it delivers value.”

Viewer Control

The Sept. 2 accord with Time Warner Cable didn’t include streaming rights to the ABC Family or Disney channels, or the ABC broadcast network. Some programs from those networks are available at their respective websites.

Kevin Brockman, a spokesman for Burbank, California-based Disney’s media networks, didn’t respond to requests for comment.

“The ability to watch this programming online is an all- around win,” Maureen Huff, a spokeswoman at Time Warner Cable, said in an e-mail. “It gives our customers more control over content and allows them greater access to programs they are already paying for.”

Disney gained 3 cents to $34.88 at 4:01 p.m. in New York Stock Exchange composite trading. The shares have risen 8.2 percent this year. Time Warner Cable, with 12.7 million video customers as of June 30, gained 42 cents to $56.60 and has advanced 37 percent this year.

Pay-TV providers such as Time Warner Cable and FiOS face more competition as companies including Apple Inc., Netflix and Roku Inc. deliver films and TV shows on the Internet.

Using cable, satellite and telecom companies to distribute programming on the Web offers more control, Kosner said. Ad sales alone won’t support online programming, he said.

More Than Ads

“We couldn’t figure out a way in an ad-supported model where that was going to make sense,” he said.

Kosner said concerns that customers may replace cable-TV with Web services including Netflix and, which is partly owned by Disney, are exaggerated.

“The existing model built around the video subscription has been a very positive business, not just for ESPN, but for basic cable networks and cable operators,” Kosner said. had 25.4 million visitors in August, according to Reston, Virginia-based ComScore Inc., an Internet researcher.

“You’re going in to be in a world where you’re working at a computer, turning one on at home to watch TV, and carrying one around with you,” Kosner said.