Given their druthers, ABC affiliates would still be the only outlets for Dancing with the Stars, Grey’s Anatomy and ABC’s other attractive primetime programming.

But, two years after losing that exclusivity as ABC explores alternative digital distribution, the affiliates are not entirely unhappy. That’s because ABC has made them partners in its online ambitions.

Getting much of the credit for the cooperative approach is Anne Sweeney, co-chair, Disney Media Networks, and president, Disney-ABC Television Group.

What that mouthful of title means is that Sweeney oversees the ABC network, ABC News, the Disney Channel and all Disney cable networks other than the ESPN-branded ones, ABC Studios, conventional program syndication and digital distribution.

According to ABC affiliates, Sweeney has been personally involved in making sure that ABC’s longtime broadcast partners are not left out or left behind as the network plunges ahead into the digital age.

The affiliates are now participating in the ad-supported streaming of ABC’s primetime shows over the network’s proprietary abc.com player.

Affiliates can put the player on their own Web sites and sell local ad availabilities. A “geotargeting” feature insures that all of an affiliate’s viewers see the local ads, even if they access the players on the national abc.com site.

In this interview with TVNEWSDAY Editor Harry A. Jessell, Sweeney discusses what’s behind ABC’s digital strategy and confirms that ABC and the affiliates are still negotiating a deal that would elevate ABC News Now from a seldom-seen broadband channel to a full-blown cable network distinguished by local news inserts provided by the affiliates.

Sounding more like a broadcaster than her cable roots might suggest, Sweeney also talks about white spaces, the DTV transition and the opening weeks of the 2007-08 primetime season.

An edited transcript follows:

It’s been two years since Disney began digital distribution of some its primetime shows with its iTune download deal. You’ve since expanded that with ad-supported streaming on abc.com and now AOL. The question is, are you getting significant revenue from any of that? If not, why bother, especially since it also means a loss of exclusivity for the affiliates.

I was reflecting this morning on the test that we did with our affiliates on the abc.com player. Do you remember back in 2006, 10 of our affiliates and 10 advertisers came into the player for a 60-day test to see what this would feel like, to see what kind of business would or could be done. The reason we went into that and the reason, quite frankly, that we did the iTunes deal the prior October was piracy.

We had hit television shows that were being pirated 15 minutes after the East Coast feed ended. They were being stripped of all their commercials and being distributed for free on the Internet. So what we did in the iTunes deal, and what we also did with the abc.com player, was to create an opportunity to keep honest people honest, to give people an opportunity to see the shows, to give our advertisers a chance to continue to be in those shows and to give our affiliates the opportunity to continue to monetize those shows.

So the motivation was not to create new revenue, but sort of a defensive play?

The real issue started with piracy because we realized that it was a great business model and that the only way to combat it was with a good offense—providing people with several different ways to access shows that they loved. One was downloading to own, along the lines of our DVD business, and the other one was to watch them for free with the advertising.

So as you sit here two years after the iTunes deal, what is your assessment? What have you learned?

My assessment is, we’ve given people two very strong and very good options. Our viewers love it. When we look at that the first full year of the abc.com player, we’ve had over 140 million episode starts.

Our affiliates are a part of this. They’re living this as we live this. As you know, we’ve struck a deal with them. We’ve got, I believe, in excess of 80% of our affiliates in business with us where they advertise the player on their Web sites. And we now have geotargeting, so that they get the credit for people from their markets who are watching the shows on the player. They sell the spots that they own in the player. So this has actually worked out for everyone. We’re learning how to operate in this new space and, while it’s still early, we believe that we’ve been successful. 

One hundred and forty million is a big number. Have you been able to monetize that number? I mean, is it real revenue?

Again, it’s a nascent business for us. So it’s impossible to compare it to our broadcast business, but it’s a business, because of piracy, that we need to be in.

As I go to some of the ABC affiliate sites, I can’t find links to the abc.com player and on some of the ones where I do find them, they’re not prominent. You really have to search to find them. Are you disappointed in the kind of promotion that the stations are giving this thing?

No. I think it’s different for every station. It’s up to them how they run their Web businesses. It’s up to them how they advertise this player.

You probably saw that we announced the Warner Bros. shows that are on ABC’s primetime this year are going into the player as well. That’s another enhancement for the viewer who’s looking to sample the shows or looking to catch up.

It’s an interesting thing. We’ve been doing research since the test started on the player because we’re very interested to see how it breaks down—who’s watching the shows on the player, who’s watching in the regular primetime spots on the network—and we’ve learned a couple of things that were fascinating.

No. 1 and probably most important to the stations and to the network is that people come to the player to catch up on an episode that they missed. Their next step is to go back to the network and to watch it in primetime. So that was a critical piece of information that we’re going to continue to track. We also found out that the average age of the person watching the shows at the appointed times on the network is 48, while the average age of the person watching the shows on the player is 28. So we’re actually capturing several generations of television viewers who are operating with a different schedule than the Baby Boomers are. We have also found that people who watch the shows on the player have 85% to 87% recall of the ads that they see. That’s a spectacular fact for everyone who advertises with us. That 85% also believes that it’s a good deal to get these shows for free with advertising.               

You’re suggesting that you get some kind of promotional lift for the network from putting the shows on the player. Can you quantify that? The other networks are doing similar things, but, in general, primetime broadcast ratings seem to be sagging again.

They’re down slightly from last year this time, single digits.

So, the question is, can you really say that all this digital distribution is really pushing people back into network primetime?

Well, what we’ve seen so far in research, it does send people back into primetime, but again you have to realize that this technology and this effort are only a year old and it’s tough to compare it to a business that is 60 years old.

Last summer you were looking at turning your broadband 24-hour news channel, ABC News Now, into a full-blown cable channel in partnership with the affiliates. But there’s been no deal. It feels like it’s fading away.

It hasn’t faded away at all. In fact, the conversations are ongoing.

And the idea would be that the affiliates would be an equity partner in that?

I’m not going to discuss the terms of the conversations, but we’ve had some pretty interesting conversations about how we would structure this.

So you think those negotiations are heading towards a deal on that and we’ll see a new cable network in time?

Knock on wood, yes, we will.

You also did a VOD deal with Cox Communications in Orange County, Calif. That doesn’t seem like a very broadcast friendly thing to do.

Actually, it’s very broadcast friendly. It’s a test. The reason we did the test with them was because they agreed to disable the fast-forward, which would allow the commercials to be seen by the viewer. But, again, this is a test. So we’re very interested to see how the viewers respond.

Those are network commercials. The question is, isn’t that a place for people to go to see primetime shows without a hook for the stations to make any money?

Well, we’ve been in conversation with our stations about VOD as well and to see what that opportunity looks like for them.

So they could work into that equation as well?

Essentially, yes. But, again, we want to see how the test works first.

Disney-ABC Domestic Television hasn’t been offering much new in the way of first-run syndication. Everybody assumes that’s because the ABC stations are pretty well set. Are you cooking up anything new there?

You know, Brian Frons [president, daytime, Disney-ABC Television Group] continues to look at new ideas and I think more importantly, he and Janice Marinelli [president, Disney-ABC Domestic Television] continue to look at what are the gaps in the marketplace and until they feel that they’ve been able to marry a gap in the marketplace to the appropriate show or appropriate talent, they won’t move forward.

To date, they’ve taken a very thoughtful approach to this and they’ve had great success.

Do you think the multiple cable plays and the digital distribution of the primetime shows are going to devalue the downstream syndication rights of the shows?

I assume you mean the shows that are produced by ABC studios. Again, it started with piracy. It is an effort to protect our intellectual property, the great work that these creative people have done. And we do believe in the long tail. We do believe that these shows are not just one hit, one year. We do believe they will be enjoyed by generations to come when provided to them on platforms that are accessible to them. This is why we’re going to be looking at this for the next couple of decades to see how people access television programming and to see when they access it.

Some folks were surprised to see you in Washington a few weeks ago lobbying on white spaces, against permitting unlicensed devices in the broadcast spectrum. What were you doing there?

It’s a very important issue to every broadcast network and every television station. We are really standing shoulder to shoulder on this one. Unlicensed devices that could interrupt our viewers’ enjoyment of their shows is a serious concern.

You actually went over to the FCC to lobby. Did you make any headway?

Yes we did. I hope we did. I think we were given a good amount of time by all of the commissioners and the chairman to lay out our concerns and I felt that they listened.

Do you have any other public policy concerns other than white spaces, any issues that [Disney Washington rep Preston] Padden is trying to involve you in?

Padden? We call him Preston here. The transition to digital television is a concern for everybody. Making sure that everybody’s doing his or her part to educate the public as to when it’s going to happen and what it really means is in everyone’s best interest.

The NAB had its big DTV press conference yesterday and it pledged that the broadcasting industry is going to run hundreds of millions of dollars in PSAs. Is ABC actually going to use some of its valuable primetime real estate to run PSAs?

Yes. Yes we are because it’s that important. It’s interesting to look at what the UK did with their transition. They’re currently at a point where 85% of their population knows and understands. Remember now, this has been going on for the last five plus years, but 85% of their population understands the transition. We’re currently hovering around 50%, which is up versus around this time last year.

Would you like to pledge a certain number of spots in primetime over the next 16 months or so?

Look, we’re committed to making sure that our audience makes the transition in the right way on time.

Let’s talk about network TV. Give me your assessment on where the season is so far just two or three weeks in.

Two or three weeks in, I’m cautiously optimistic. I really give Stephen McPherson a lot of credit for the choices that he’s made. I think his strategy of opening up Wednesday night, not unlike the strategy last year of opening up Thursday night, was a very smart move. I’m pleased with the performance on this past Friday night of Women’s Murder Club. Anytime someone tells you that a night is dead and not fit to be programmed is sometimes a great opportunity. Looking at the performance of Samantha Who? last night, the continued strength of Dancing with the Stars, you know I’m very happy with the network’s performance.

Well, all those new shows are not all going to make it though. I know that Tuesday night’s struggling. When are we going to see some cuts being made here?

Not anytime soon to be honest with you. We really think these shows deserve a little more time to find their audiences. Every network went out with its offerings in the space of three weeks so you have to wait for viewers to complete their sampling. Again, this is where the player comes in very handy.

Someone drives by a billboard and sees Private Practice. They didn’t get a chance to see it when it premiered, but they can go into the player, catch up on episodes. So, we’re hopeful that a combination of our scheduling strategy, our promotion strategy and our Internet strategy will encourage more viewing of our shows.

So there’s nothing on life support right now. Is anything a clear winner to you right now?

I never make those calls. I like to watch things evolve. I like to see the audience find them, to give the marketing team a chance to think through how to reach them.

On the news front, you have to be pleased with the performance of Charlie Gibson and World News. That’s a surprise isn’t it?

No, it’s not a surprise. I believe Charlie Gibson is really that good and World News is solid journalism,

A surprise in the sense that Brian and Katie were getting all the attention at the start.

That’s where I thought David Weston did such a brilliant job. He let the noise pass. You’re right, the attention was all on what was new and our attention was on journalism. I give David and the team a great deal of credit. It’s all about the work. It’s all about their reporting.

When I look at the continued strength of George Stephanopoulos and This Week, and the excitement that we all feel about the election and how Charlie will cover it, the reinvention of Nightline, the continued strength of 20/20. I mean this is a division that is really, really on fire.

The final word is yours.

The partnership that we have with our affiliates is very encouraging as we look at our programming, as we look at marketing and promotion. We have a very vibrant [affiliate] board, very smart people who are interested in being experimental in this [digital] phase. I really credit them with the success of the player, for really getting behind it, learning from it and helping us figure it out as we go along.