UPDATE 2-Time Warner Cable, Disney reach program deal

* Deal includes Web access to ESPN, ESPN2, ESPNU

* Time Warner Cable ISP customers also have ESPN3.com

* New Disney Junior channel to launch in 2012

* Expanded video-on-demand covers ABC, Disney, local ESPN (Recasts lead; updates deal features)

By Yinka Adegoke

NEW YORK, Sept 2 (Reuters) - Time Warner Cable Inc (TWC.N) and Walt Disney Co (DIS.N) said on Thursday they finally reached a new expanded programming deal, ending a dispute that threatened to black out some of TV's favorite shows and channels from millions of homes.

The agreement, struck more than half a day after a Thursday midnight deadline passed, will provide expanded access to Disney-owned content, including the new Disney Junior basic cable channel and ESPN Networks, via the Web for Time Warner Cable and Bright House Networks customers.

It also features more video-on-demand on cable, including ABC On Demand and Disney-branded programming.

Both sides said in a statement they were pleased to have reached a deal without disrupting service.

The fee dispute has primarily been about how much the cable operator would pay Disney for the right to carry its TV networks.

While fee negotiations are always about how much the cable operator pays, the talks between Time Warner Cable and Disney were complicated by the increased competition from online video services such as Netflix Inc's (NFLX.O) streaming service and Amazon.com Inc (AMZN.O).

Executives at Time Warner Cable had also been concerned new services such as Apple Inc's (AAPL.O) 99-cent TV show rental service launched on Wednesday would compete with cable. [ID:nN31268065].

The executives had also been reluctant to pay a carriage fee for ESPN3.com, a Disney website that features some live sports that is only available to subscribers of its programming partners' Internet service provider.

In a bid to assuage such concerns, Disney expanded its Web offering to include new subscriber authenticated access to watch ESPN, ESPN2 and ESPNU online, as well as through mobile connected devices such as the iPad.

Time Warner Cable will also be rolling out two sports highlights channels called ESPN Goal Line and ESPN Buzzer Beater.

One of the key features of Web TV has been the ability of users to watch shows when it suits them. To this end, Time Warner Cable and Disney also expanded the range of on-demand programming to include ABC On Demand, which feature prime-time shows such as Grey's Anatomy and Desperate Housewives.

The deal has also expanded on-demand Disney-branded shows and locally relevant sports from ESPN in markets that include Los Angeles, New York, North and South Carolina, Tampa, Orlando, Texas and Ohio.

The two sides also clashed over Time Warner Cable paying cash for a retransmission fee to carry free-to-air ABC broadcast signals on their cable systems.

But retransmission had become almost a secondary issue as cable operators worry the cable programming business model could be unraveled by the increasing availability of current TV shows sold individually on the Web. (Reporting by Yinka Adegoke; editing by Michael Shields, Derek Caney and Andre Grenon)