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Disney Experiments With New Video On Demand Business Models

Two recent deals announced by Disney illustrate how the studio is experimenting with new VOD business models that put greater emphasis on advertising revenue and speed content delivery to international markets.

In the first, Disney has agreed to make hit U.S. series available for free as ad supported content on Channel 4’s Internet download service, a marked shift from the traditional pay per episode or subscription models that have generally been used for VOD.

The deal allows users of the U.K. broadcaster’s 4oD Internet download service to watch free episodes of Ugly Betty and eventually other popular Disney shows, including Desperate Housewives, for up to 30 days after their broadcast debut.

It is the first time in Europe that Disney has made its network series available for free on an ad supported on-demand platform, said Tom Toumazis, executive VP and managing director of Disney-ABC International Television EMEA. He said ad-supported VOD models will become increasingly important internationally, just as they have in the U.S.

In another late October deal, Disney announced plans to make Lost and Desperate Housewives available on ITI Neovision’s subscription VOD services in Poland within a week after they air in the U.S.

“We’re very committed to exploring new business models and speeding the delivery of our content,” in part as a way to reduce piracy, said Toumazis.

The first season of Lost, which bowed in the U.S. in 2004, aired on Channel 4 in August 2005. But the third season debuted in the U.K. within 4 days after its U.S. premiere. Disney currently delivers an HD version of Lostto Sky One, which now has rights to the series, within 24 hours of the U.S. airdate.

Delivery to the U.K. market doesn’t require subtitling or dubbing but Toumazis adds that “we’ve pledged to our international broadcasters that we would be able to deliver fully dubbed episodes six weeks faster than we’ve ever done so.”

That means the first episodes of Disney’s fall shows will be available fully dubbed internationally by January 2008, and the last episodes of the season would be available internationally only a few weeks after the series finishes in the U.S. “We are investing heavily in this because we think it will be an important competitive advantage for our shows,” he said.

While users pay for the on-demand programs in the Polish deal, Toumazis also sees healthy potential for ad-supported on demand models.

Toumazis declined to discuss whether VOD ad revenue would be split for the Channel 4 or terms of the deal.

But he did say the idea potentially opens up a new advertising revenue stream for the studios. “The interesting thing about the ad supported VOD model in the U.S. is that there are examples of how the inventory is shared between the content owner and the platform,” he said. “We don’t have an ad sales operation but we’re exploring all the possible options of how that revenue and inventory could be shared.”