Disney’s Millennial-Focused Freeform Tries out Netflix’s Model

(Bloomberg) -- With so many millennials watching videos on phones and tablets these days, Walt Disney Co.’s Freeform cable network tried something new with the Jan. 2 premiere of “Beyond.”

Fans who went to the Freeform website or app could view all 10 episodes of the fantasy drama. While that’s typical for streaming services like Netflix Inc., which load full seasons of shows on their websites, it was a first for a Disney channel. Many viewers watched all 10 hours in one sitting, devouring more than two months of TV in less than half a day.

“Binging used to be something a little unsavory,” said Tom Ascheim, the president of Freeform. “Now it’s all about how people want to watch TV.”

TV networks of all stripes are adjusting to big changes in viewing habits. Netflix, the pioneer in streaming, proved that offering entire seasons of “House of Cards” and “Breaking Bad” could boost interest in the programs. That’s forced conventional networks to rethink their strategy. Last year, NBC let viewers see the entire season of “Aquarius” online immediately following the premiere, a move it credited with adding to the show’s popularity.

Freeform changed its name from ABC Family a year ago, reflecting a shift in focus from teenage girls to a broader audience of tech-savvy 18-to-34 year-olds. Alongside youth-oriented programs like the network’s biggest hit “Pretty Little Liars,” Ascheim has added “Shadowhunters,” about 20-somethings battling evil spirits to save the world, and “Beyond,” in which a young man awakens from a 12-year coma and discovers he has superpowers.

“Beyond” drew 14.2 million viewers in its first week, with almost half the audience watching online, according to Freeform. Partly in response to viewer requests on social media, Ascheim announced plans on Tuesday for a second season.

Disney isn’t abandoning the traditional pay-TV business model. Viewers who want to watch the full season of “Beyond” online still have to prove they are cable subscribers or borrow their parents’ login information.

For online viewers, Ascheim reduced the number of ads per show to four from the 25 that appear on regular TV -- and still collected enough to equal what the network makes with a normal commercial load. Sponsors visible at the site include Apple Inc., Verizon Communications Inc., the U.S. Air Force and the STX Entertainment movie “The Bye Bye Man.”

“Having less clutter is a positive,” said Tony Wible, an analyst at Drexel Hamilton LLC, who said Burbank, California-based Disney can afford to experiment with Freeform because it’s a small part of the company’s TV portfolio, which includes ESPN, the Disney Channel and ABC.

Freeform’s focus on millennials and online access is having an impact on conventional viewing. The channel’s prime-time pay-TV audience fell 18 percent last year to an average of 856,000 viewers from 1.05 million in 2015, according to data provided by Freeform, a drop that could ultimately hurt its bargaining power with pay-TV providers.

Since its audience is much smaller than ESPN or the Disney Channel, Freeform could be threatened in the push by cable and satellite companies to offer smaller, cheaper packages with only the essential channels for most viewers. Thus far, Disney has been able to negotiate to include Freeform in online pay-TV services like Sling TV, PlayStation Vue and DirecTV Now.

Although Disney doesn’t disclose Freeform’s financial results, Ascheim said revenue and profit set records last year, a sign the migration of viewers online appeals to advertisers and pay-TV distributors, who know the trend is irreversible.

“You can’t fight gravity,” he said.

To contact the reporters on this story: Christopher Palmeri in Los Angeles at cpalmeri1@bloomberg.net, Lucas Shaw in Los Angeles at lshaw31@bloomberg.net, Nicole Piper in New York at npiper@bloomberg.net. To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Rob Golum