Comcast Corp. is attempting to expand its lead in the market for high-speed Internet service by giving subscribers ABC News and Walt Disney Co. children's programming in the biggest online content deal signed to date by the cable giant.
Beginning today to coincide with the run-up to the Democratic National Convention, Comcast's 5.7 million high-speed Internet subscribers will receive a number of ABC News features, including live streaming news and archived versions of its "World News Tonight" and "Nightline" programs.
Later this year, Comcast will launch an online children's channel that will offer Disney features such as short videos and activities as well as discounted rates to Toontown Online, a multi-player, subscription-based computer game.
Philadelphia-based Comcast, which is the nation's largest cable TV system with 21.5 million subscribers, will pay Disney, which owns ABC, an undisclosed amount for the new content, most of which will be given to its Internet subscribers at no additional cost. Comcast will share in additional revenue Disney earns by selling subscription services to Comcast users.
"The thing that's going to drive penetration of [high-speed Internet] into homes is a combination of . . . speed and content that resonates with consumers," said Stephen H. Wadsworth, president of the Walt Disney Internet Group. "This [deal] becomes a model of how this is going to grow" across the industry.
The Comcast-Disney deal, which began to take shape before the Walt Disney Co. rebuffed an unsolicited takeover bid by Comcast in February, is the latest and largest of a growing number of alliances between content companies, such as Disney, and Internet distribution networks, such as Comcast.
Internet service providers have long believed they need to offer unique content to lure subscribers from other services; hence the "walled garden" of America Online, where users can find special news, sports, entertainment and other features. But such content has been limited by the speed of the Internet pipeline. Dial-up telephone connections -- which most AOL subscribers have -- are slow, making it nearly impossible to watch Internet video.
AOL is attempting to sell its dial-up subscribers on the high-speed AOL service, which costs about twice as much per month, by offering exclusive content, such as live rock concerts.
For Comcast, the Disney deal is a way to lure more customers and possibly win new ones.
"If we create rich content areas where people go for information, it really begins to separate you" from other high-speed Internet providers, said Comcast spokeswoman D'Arcy Rudnay. "The children's programming is very appealing. Kids now, even little, little kids 3 and 4 years old, start playing around with computers on their mom's and dad's lap."
For Disney, which already sells its ABC, ESPN and Disney Channel television programming to Comcast, the deal is another distribution tool. Walt Disney Internet Group is the reorganized remains of the ill-fated Go.com, an Internet portal the company launched in 1999 that cost Disney millions of dollars in write-downs. Last year, the Internet Group became profitable for the first time and booked about $300 million in revenue, Wadsworth said.
Disney is only beginning to mine Internet revenue in the United States, where about 20 percent of all Web users have high-speed connections. The company's chief Internet revenue engine is Japan, owing to its higher percentage of high-speed Internet users. There, the company sells cell phone ring tones and games over the phone and online.
"I'd say that over the next five years, if we embark on appropriate new investments in new areas and continue to grow, we'll start to become meaningful as operating income to the company," Wadsworth said.