Is ABC Entering the 24-Hour News Biz?

The Disney unit is testing a market dominated by CNN, Fox News, and MSNBC. It may soon take the plunge

By Ron Grover

Is there a cable news channel in ABC's future? It's starting to look like the Walt Disney (DIS ) unit has designs on joining CNN, Fox News, and MSNBC in the war for news junkies' eyeballs. In July, ABC quietly launched what it's calling ABC News Now, a 24-hour service that kicked off with coverage of the Democratic National Convention and will run at least through Election Day. Then, according to Disney President Bob Iger, it will be time to decide if the experiment is to become an ongoing business. "In many respects, this is the shape of thing to come," Iger told a conference call when the company announced its third-quarter earnings on Aug. 10.

The channel, which features exclusive coverage from ABC stalwarts like Peter Jennings, George Stephanopoulos, and Cokie Roberts, is already being delivered through multiple outlets. The company has already struck deals to stream news through AOL (TWX ) and SBC Yahoo! DSL (SBC ), along with another to show it on Sprint (FON ) Vision phones using MobiTV. Disney is also airing the channel over 70 ABC-owned and affiliated stations in major markets, with those stations using the digital spectrum awarded them by the federal government.

ABC News Now, the brainchild of ABC News president David Westin, is a shrewd move to tap into the ever-increasing ways folks can keep up with events -- over the Internet, on cable TV, even on cell phones. "The world is fundamentally changing from a time when large media oligopolies control distribution to when folks will be the ones with the votes for where they get their news," says Westin. "I don't know where and when, but I know the direction it's going."


  Disney clearly has the ability -- and the ambition, most likely -- to enter the bigger cable- and satellite-TV market down the road. Disney executives have said ABC News Now is an experiment, but Westin says that the outfit is already getting millions of dollars from licensing the news to online sites and cell phones, turning the experiment into a hit -- and perhaps something more. And as Iger noted during the company's conference call, ABC can use the FCC's "must carry" rules to get cable operators to carry the channel on their digital tiers in those areas where an ABC affiliate is carrying ABC News Now on a digital channel.

At the moment, that covers around 66% of the country, says Westin. Indeed, the company says that in the markets where an ABC station already carries the news channel, cable giant Comcast (CCZ ) is carrying ABC News Now programming as well. It can be seen, however, on the so-called digital tier, which has more channels than the traditional cable lineup but, at the moment, has been ordered by only about one-third of the nation's 74 million cable customers. In all, Iger figures about 500,000 folks have access to ABC News Now, although there are no ratings available. Indeed, ABC News Now's reach is still a far cry from that of CNN and Fox News, which in August delivered their news to an average of more than 1.6 million folks a day.

But the potential is huge: The channel is capable of archiving shows, which would allow viewers to catch, say, Ted Koppel on Nightline from a day or week earlier, and to call up whatever news story they might choose. During the opening night of the Democratic convention, for instance, the news service was streamed by about 250,000 unique users over AOL, ABC says. One of those was Iger himself, says Westin, when the Disney president caught the Jennings report on his wireless laptop computer while vacationing in Hawaii. Comcast, which is making the service available to its nearly 6 million Internet customers, recorded 1 million streams -- with the average viewing time being 15 minutes, a hefty amount for Internet viewing.


  The notion of creating a news channel has intrigued Disney in the past. The company contemplated an all-news cable channel in the late '90s, but decided that the market was too crowded. And in early 2003, the company abandoned months of merger talks with Time Warner's (TWX ) CNN unit, when the parties couldn't decide who would control the venture. At the time, both media giants saw a merger as a way to reduce overhead by combining news staffs, with estimates running as high as $200 million in combined cost savings.

That was before the digital world changed, with cable operators finishing much of the upgrades to fiber-optic cable that gives them the ability to add hundreds of channels and to offer lightning-quick Internet connections. That makes the idea of launching an all-news channel more appealing since costs would be so much lower. A decision on continuing ABC News Now will be made later this year, Iger says, although he noted during the conference call that the rollout of the channel was "done at a very modest cost" and that the company is "likely to keep the thing up." Stay tuned. This could turn into something big.

Grover is bureau chief for BusinessWeek in Los Angeles

Edited by Beth Belton

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