By NICK WINGFIELD, JOE FLINT and ETHAN SMITH
Staff Reporters of THE WALL STREET JOURNAL
October 17, 2005; Page B1
Last Thursday morning, Apple Computer Inc. started selling an episode
of the hit television series "Lost" through its iTunes Music Store for
$1.99 after the show aired the night before on ABC. It marked the
first time a popular show was made available for legal downloading
over the Internet so quickly after its original airing.
With that, Apple may have helped open a Pandora's box for the media
business. The Cupertino, Calif., company and its first TV partner --
Walt Disney Co., the parent of ABC -- have taken a potentially
significant step in the dismantling of a decades-old system for
distributing TV programming to viewers, a move that could have
profound long-term consequences for broadcasters, cable systems and
satellite companies if more users download shows instead of watching
them the old-fashioned way.
Apple's deal with Disney, which also includes past and current
episodes of "Desperate Housewives," "Night Stalker" and "That's So
Raven," is already causing waves in the TV business. On Friday, Leon
Long, the president of the association representing ABC's affiliate
stations, expressed misgivings about the partnership, which was
announced publicly by Apple Chief Executive Steve Jobs and Disney CEO
Robert Iger at an event last Wednesday. In a letter Mr. Long sent to
the president of the ABC network, Alex Wallau, Mr. Long said ABC
affiliates are concerned that they weren't given an opportunity for
financial participation in a new form of distributing shows that
derives value through the promotion and broadcasting of affiliates.
The letter, a copy of which was reviewed by The Wall Street Journal,
says: "It is both disappointing and unsettling that ABC would embark
on a new -- and competitive -- network program distribution
partnership without the fundamental courtesy of consultation" with its
Mr. Long, who runs the ABC affiliate WXON in Biloxi, Miss., didn't
return calls seeking comment. Mr. Wallau said he would respond to the
affiliates this week but declined to comment further.
For TV affiliates, Apple's new offering "is really bad," says Josh
Bernoff, an analyst at Forrester Research in Cambridge, Mass. "You
don't get anything. You just get a smaller audience," he says.
Also concerned about the Apple-Disney partnership are the unions that
represent TV-show writers, producers, directors and actors. Soon after
Disney and Apple's announcement, those unions issued a joint statement
saying, "We look forward to a dialogue that ensures our members are
properly compensated for this exploitation of their work."