Helping the Walt Disney Co. take a bold leap into the unknown, Anne Sweeney led the charge last fall when the company unveiled its groundbreaking licensing pact with Apple that made “Desperate Housewives,” “Lost” and other ABC and Disney Channel programs available for download-on-demand access via iTunes. As co-chairman of Disney’s Media Networks division and president of the Disney-ABC Television Group, Sweeney oversees a wide swath of international TV turf, from the bustling Disney Channel Worldwide operations in 100 countries to ABC and its offshoots to the Touchstone Television production unit. With the one-year anniversary of Disney’s plunge into digital distribution approaching, Sweeney recently spoke with The Hollywood Reporter’s Cynthia Littleton about insights gained during the past 12 months and where she sees the business headed in the future.
The Hollywood Reporter: What stands out in your mind about your recent experiences with digital licensing and delivery? Any eureka moments?
Anne Sweeney: There are three moments that stand out. The first moment was the morning after the (Season 1) finale of “Desperate Housewives” had aired (in May 2005). I had my cable executive team meeting, and I walked into the meeting thrilled. The ratings had come in, and they were spectacular. This was a hit show. Vince Roberts, our worldwide head of technology and operations, said, “Congratulations! We’re all thrilled for you and ABC. This is a tremendous moment. Can I show you something?” He got up and popped a DVD into the player in our conference room, and the finale of “Desperate Housewives” came up. And he said, “Fifteen minutes after the show ended last night, I downloaded this from BitTorrent.com.” The quality was very good. The commercials had been stripped out. Talk about having a pause in the conversation. We started talking about piracy in a new way, which was piracy as a true competitor for our viewers. That was the moment when we knew we had to do something, but we didn’t have many options.
THR: And the second?
Sweeney: The second moment was when (Disney president and CEO) Bob Iger called me and said, “Give (Apple CEO) Steve Jobs a call. He has something he wants to talk about.” And that conversation was about the video iPod and putting “Lost” and “Desperate Housewives” and other shows on iTunes. And that was the moment that took us back to the “Desperate Housewives” example because it presented us with an opportunity to keep people honest and to give our viewers more opportunities to see the show. We knew that even with a hit show, an avid viewer generally only sees six to eight episodes a year. We produce in the neighborhood of 22 or 25 episodes. That leaves a lot of room — not for cannibalization but for opportunity for these shows. So, making these shows available on the iTunes platform was a plus for ABC, and it was a plus for these franchises. We also saw it was a way of continuing these franchises into the future because they would be able to draw more people. The third moment was the launch of the ABC.com player test in May and June, when we put “Lost,” “Desperate Housewives,” “Commander in Chief” and “Alias” on ABC.com and streamed it for free with advertising. That was an experiment. We knew a lot from our iTunes experience. This new experience was ad-supported. So, we had all of the same questions as we did at first with iTunes. Would it cannibalize? Would it be additive? What would this mean to the shows themselves?
THR: What did you learn?
Sweeney: We learned a couple of key things during the test because we did all kinds of research. Of course, we looked at server data, but we also did focus groups, and we also did exit interviews after people had watched and experienced the player. And we learned a couple of key things. The first was our approach to putting advertising in the shows. Our approach was to get one sponsor for an entire episode. So, in “Desperate,” you would have Olay doing a 15- or 30-second commercial and a lead-generation ad where you could type in your information and receive a $3 coupon for their products, or you could link to a Web site. So, you had all these opportunities to interact with the advertiser. And we found that 87% of the people who watched the shows on the (ABC.com) player remembered correctly the name of the sponsor and the products in that episode. That’s a great fact. Those are wonderful numbers. We also found out that the average age of people watching the shows on ABC.com was 29. They were upper-income, highly educated. That was a sign that this is additive compared to the average age of viewers of the shows on the network.
THR: Did you bundle advertising on the ABC.com platform with sales for the broadcast network during this year’s upfront sales period for the 2006-07 season?
Sweeney: We elected to keep it out of the upfront. We’ve been selling (ABC.com advertising) in the scatter market.
THR: How is the revenue base for the Disney-ABC Television Group changing as you move deeper into digital business? Do you see a proportional shift coming between digital and traditional broadcast revenue?
Sweeney: (Digital) is a small percentage of advertising compared to the behemoth that the ABC television network is. But is it growing? … I don’t see proportional shift in the short term. I see it as additive, but I don’t see it shifting from one to the other.
THR: Will streaming become a real business for your channels? Do some in the industry see it as more of a marketing tool at this stage?
Sweeney: The thruline on all of these new technologies is about reaching consumers who would normally come to your content if it were easier for them to access. Now, we have several ways of getting to them. We have iTunes, we have ABC.com, we have the ABC television network — and you realize that these things come together holistically. They’re not platforms that live separate and apart. One of things we did to take a test to the next stage was with a show called “Kyle XY.” It’s produced by Touchstone Television. It premiered on ABC Family on a Monday night, repeated on ABC on a Friday night and went into the iTunes store on Saturday. And all of these platforms cross-promoted to one another in an effort to make life easier for the viewer. … Disney Channel uses its uberbrand to help kids navigate between their DisneyChannel.com player and their network. The Disney Channel broadband story is wonderful. It launched in June. To put it in perspective, during the ABC test, we had 5.7 million streams of episodes. Far more people watched than the number of streams. In contrast, during same period, Disney Channel had 37 million streams, and that tells you so much about kids and technology.
THR: Do you see a time in the near future when your studio produces wholly original programming for new platforms? Do you think you could launch a new property via iTunes or one of the Disney Web sites or broadband channels?
Sweeney: We may. … It’s wonderful because it’s all green fields at this point. We’re in a world where anything can and probably will happen. For the moment, we realize the value of putting our hit programming on those platforms to help build audience for them. One of the things we’ve announced are the “Lost” mobisodes to air on (mobile) phones. You’ll see some of characters from “Lost” in these mobisodes and then others who are part of the myriad back stories of those characters.
THR: What has surprised you the most as you’ve ventured into these uncharted waters?
Sweeney: Everything was a surprise because we didn’t know. One of the great things that came out of the iTunes experience — in the process of the negotiation, we were actually able to develop a criteria for dealing with new media, starting with: Is this a company that respects and will protect our content as we do? Is there a business deal to be done? Is this a company that has a strong and positive relationship with their consumer? Is this a company that is going to get behind the marketing of our content and not just rely on our network to push it? This was what we learned that Apple would do. It really did become the gold standard for us. The morning after the iTunes deal was announced, I gathered the troops together and asked them about the phone calls they’d received. Of course, everyone (from other outlets) was saying, “I want your shows for X platform.” We discussed the criteria that had been developed in the context of the iTunes deal, and we started to put all of these requests through that filter and to determine what questions we should be asking next. It became the criteria through which we would evaluate other opportunities.