Desperate Housewives Online!

When it comes to the digital future, Walt Disney Co.'s pioneering strategy seems to be to act quickly and ask questions later. After becoming the first network to sell commercial-free downloaded shows through Apple's iTunes video service last year, ABC revealed Monday that it plans a two month "test" offering four primetime shows free online via streaming video. Beginning April 30, fans of Lost, Desperate Housewives, Alias and Commander In Chief with access to broadband internet connections will be able to watch the programs on abc.com the day after their television debuts, with each episode carrying a few special, unskippable commercial breaks. But as with the iTunes deal, Disney execs have gone ahead without approvals from affiliates (which carry the shows on local television outlets) or the various guilds and unions who provide talent and crews for the programming. Moreover, it's unknown how the new approach will impact ratings (the test comes in the middle of sweeps), paid downloads, DVD sales or future syndication sales.

One thing ABC (and other networks) can count on is a drawn-out brouhaha with the Screen Actors Guild, the Directors Guild, and other Hollywood unions. Unions are already demanding a boost in residuals members earn for iTunes downloads, and they may ask for additional money coming from the new revenues generated by streaming video ad sales. SAG says all unions combined now get a piddling two cents for each $1.99 download, with actors receiving about half of that, and the Writers Guild of America, which represents scriptwriters, says their residual amounts to less than half a cent. For its part, ABC states that its contract allows the network to pay unions for downloads based upon previously agreed rates covering VHS videotape sales, a position that SAG and WGA leaders naturally object to. The industry powerhouses are expected to face off in arbitration, but talks could linger into the next year or so when the unions' current contracts run out. If things really heat up, it could even result in a strike.

Just last month, leaders of the Writers Guild issued a call to arms against the media giants. "Disney and the other companies have refused for years to adjust this outdated formula for the DVD market and now they are trying to do the same thing with the next generation of technology," said the WGA declaration. "We support those advances but not without fair compensation for the hardworking men and women who write, perform, direct, and otherwise create the very content that makes their new revenue streams possible. Rest assured, our Guilds will take all affirmative legal action within our power to see that this inequity is resolved to our benefit."

Regardless of how those compensation schemes are worked out, it's a safe bet that other networks will follow Disney's lead. Rafat Ali, editor and founder of the influential business website PaidContent.org, says, "NBC will probably push a lot of their programs through [its new acquisition] iVillage.com, and Fox really hasn't done much with marketing or streaming their shows on MySpace.com. But you'll see much more of that happening now."

Indeed, every network and Internet portal is scrambling to get online. Last month, Warner Bros. Television and AOL launched In2TV, an ad-supported streaming video service offering hundreds of vintage shows online, with upcoming plans for paid downloads as well as original webisodes from Punk'd creator Ashton Kutcher and Survivor producer Mark Burnett. CBS has been streaming NCAA basketball games, while also selling CSI and other shows on Google. NBC has become a major content provider to iTunes, and previewed The Office on MySpace before the show hit traditional airwaves.

Fox — the most cautious online programmer of the Big Four — is still treading carefully, but last month the network began offering FX series Black. White. and the miniseries Thief on its sister DirecTV satellite system 48 hours before the shows had their premieres on the cable channel. Plans are in the works to do the same for upcoming episodes of FX's hits Rescue Me and The Shield. According to recent studies by Points North Group and Horowitz Associates Inc., nearly half (47%) of adults between 18 and 34 said they'd pay to see a show before it runs on traditional broadcast networks. And as long as consumers are willing to part with more money for new viewing opportunities, Hollywood can be counted on to fight over it.