Video-on-demand shows to be free, with a catch

Walt Disney Co. and Cox Communications Inc. are planning an experiment in Orange County this fall to gauge whether people who have advertising-skipping technology are really willing to watch commercials.

The trial program, unveiled Tuesday, will give Cox’s 250,000 cable subscribers in the county the option of watching episodes of four shows on Disney’s ABC network -- “Ugly Betty,” “Grey’s Anatomy,” “Desperate Housewives” and “Lost” -- through Cox’s video-on-demand service. Certain college football games also will be made available.

The shows and games won’t cost anything but also won’t be free of commercials, because Cox will disable the fast-forward feature that lets on-demand viewers zip through the ads.

Television executives will be watching closely. They have been scrambling to find ways to protect more than $60 billion a year in advertising revenue as audiences for their shows shrink and as more consumers become comfortable watching shows on their own terms and time schedules.

“No one wants to move into the future without figuring out how to take the advertisers along with them,” said James McQuivey, an analyst with Forrester Research. “This simply gives people a choice. Do you want to plan ahead and set the recorder and make sure that you have space on your hard drive? Or if you miss a show, you could always go back and watch it with some ads.”

The arrangement will cover only ABC programming on Cox’s video-on-demand platform and won’t affect subscribers with digital video recorders. They will still be able to speed through ads.

According to some estimates, within five years more than half of all U.S. homes with TVs will be equipped with digital video recorders, making the industry’s challenge to protect its ad revenue all the more urgent.

During the last year, TV executives have tested the digital waters by putting some shows online with just a few commercial messages. CBS and NBC have offered ad-free shows for 99 cents through some cable and satellite TV providers.

So far, people have been more inclined to watch shows they don’t have to pay for even if they include ads.

“We’re trying to find a model where we will keep our ads in,” said Ben Pyne, the Disney executive in charge of cable affiliate sales and marketing. “We’re trying to find ways to have the consumer see our best content in ways that we can monetize.”

Viewers, according to Pyne, are willing to watch commercials as a trade-off for seeing their favorite shows at a convenient time. That was one finding from an ongoing Disney experiment, which he said had demonstrated the popularity of ad-supported online streams of ABC shows.

The shows ABC has put on its website have drawn more than 100 million views since last fall, Pyne said. That’s why Disney believes that consumers might warm to this latest offering through Cox -- which also provides time-shifted shows for free.

Others aren’t so sure.

“Consumers are going to find this less than palatable,” predicted Tim Hanlon, senior vice president for Denuo, the media futures unit of advertising giant Publicis Groupe. “It’s an interesting compromise that interestingly neglects the consumer.”

The problem, Hanlon said, is simply too many ads. That’s what annoys viewers and makes DVRs so attractive, he said.

Disney’s Pyne said the shows and games available on Cox during the Orange County experiment might contain fewer ads than would be seen during the network broadcast.

Cox is considering offering targeted advertising and the flexibility to shuffle ads, so consumers won’t see spots for, say, a movie that opened last week.

meg.james@latimes.com

Times staff writer Dawn C. Chmielewski contributed to this report.