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Disney CFO: Downloads Not 'Cannibalistic' of DVD

3 Oct, 2006 By: Erik Gruenwedel

During a two-month trial run this summer of its broadband player, ABC.com visitors downloaded a combined 5.7 million episodes of “Desperate Housewives,” “Grey's Anatomy” and “Lost.”

Speaking to British investors Oct. 2, Tom Staggs, senior EVP and CFO with The Walt Disney Co., which owns ABC.com, said the ad-supported site helped foster stronger DVD sales of the second season of “Lost” (compared to the first season), despite the availability of episodes online.

“That bolstered our view that we think this wasn't cannibalistic,” said Staggs. “In fact, we think there is a good likelihood that this keeps people involved in the shows more deeply.”

In a survey of online viewers, Staggs said 87% of users were able to recall the advertisers, which he said was double the recall for television ads. The average online viewer was 29 years old, compared to 40 for the average TV viewer.

He said 80% of online viewers had a positive download experience, and subsequently ABC.com will offer downloads of seven shows this fall, including newcomers “Ugly Betty,” “Six Degrees,” “The Knights of Prosperity” (about a group of blue-collar stiffs who scheme to rob a celebrity in New York) and “The Nine,” which is about nine strangers in a Los Angeles bank who become embroiled in a bank robbery.

The show premieres Oct. 4 starring Scott Wolf (“Party of Five”) and Tim Daly (“Wings”).

“The evidence is that [downloading] is an alternative form of viewership, and it doesn't seem to be substituting [for packaged media],” said Staggs. “I would be surprised in the next few years if downloading cuts into DVD sales. I think it is largely going to be additive [financially].”

The CFO downplayed recent reports suggesting Wal-Mart was pressuring studios to reimburse the retail behemoth for DVD wholesale due to download offerings on Apple's iTunes. Wal-Mart reportedly accounts for almost 40% of the studios' DVD sales.

“Wal-Mart has said that they believe in the exploitation of new technology,” Staggs said. “We haven't received any push back from them. Our experience with them has been good. We are pleased where things are headed in that direction but we are also comfortable with the response from our distribution partners like Wal-Mart.”

Finally, Staggs was asked how the increased use of the digital video recorder would impact TV viewing habits in the short term. He thought overall TV viewership would increase in the form of time-shifted viewing.

“We think overall average hours viewed per week will be up by as much as 10% over the next 10 years,” Staggs said.

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