Cable law may hurt upstarts

New cable networks–and emerging programming services–may find it tough to get cable operators to carry their networks with the extra costs the new cable reregulation legislation is expected to impose.

So far, no one seems to know exactly what those costs will be, but operators say they will take a more conservative approach to managing their business now that the bill has become law.

Lynne Buening, director of programming for Viacom Cable in Northern California, said her company will continue to make programming decisions cautiously. Presently, the majority of Viacom’s systems are at 36 channels. While three quarters of them are in some stages of being rebuilt, the new legislation “will not make things easier” for her to add programming services as channel capacity expands. “It makes it tougher to escalate the product lineup if we can’t pass the extra costs along.”

The bill’s passage also means she will become more discriminating about programming. “If it’s not strong out of the gate, I don’t want it on the air.”

So far, cable operators are not dropping underperforming channels, but it’s conceivable that could happen as competition for channel space accelerates.

Douglas Holloway, senior VP of affiliate relations for USA Networks, believes systems will regularly undertake consumer surveys asking what they should drop–just like the surveys now inquiring about new services to add.

Lee Masters, president and chief exec of E! Entertainment Television, said convincing operators to take on additional services has been a challenge for the past three years. With rate regulation on the horizon, the industry has been in “a holding pattern,” he said.

Masters is optimistic that now that the situation is resolved–and cable operators know what they are facing–it might open up some channel space. But if cable operators have to pay fees for broadcast signals–the most controversial part of the legislation–“it will really prevent cable operators from adding new services,” he said.

At 21 million subscribers, E! has been adding 3 million to 4 million subscribers annually for the past three years. It’s an open question whether the web will be able to continue to grow at that pace.

Many network exex say they prepared for the likelihood of reregulation in their business plans. John Hendricks, chairman and chief exec of Discovery Communications, for example, said when his company purchased the Learning Channel (now at 18 million subscribers) in 1991, it accounted for rereg.

Likewise, Steven Brill, chief exec and editor-in-chief of Court TV, said its business plan assumed cable reregulation was a certainty. At 7.5 million subscribers, the web is far from achieving power in the marketplace. At present, Court TV’s goal “is to keep viewership and its profile high during this period of adjustment.”

What Brill is waiting for–along with nearly all the nascent networks–is the expansion of channel capacity that will come from digital compression and fiber optics. Most expect that to happen in three to four years.

Brill insisted that Court TV will break even when it passes the four-year mark in 1995. “We know what our costs are,” said Brill. “I never considered this a get-rich-quick scheme.”

Turner Broadcasting, which launched the Cartoon Network only last week with a scant 2 million to 3 million subscribers, insists the just-passed legislation will not keep it from being successful.

“This (Cartoon Network) is designed to be a very inexpensive channel,” said TBS director of government affairs Peggy Binzel. “We can afford to be patient.”

Still, she acknowledges that a high-cost network like TNT, which launched in 1988 with 17 million subscribers, could never get started in the current environment.

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