Testing new waters for cable

Throughout the early ’90s, hypemeisters trumpeted their predictions that by 1995 millions of homes would be using interactive boxes on their TV sets to do practically everything. Subscribers would be calling up the latest movies at the flick of a switch, playing videogames with opponents in other cities and placing bets on horse races from the comfort of a living-room recliner.

But many of those plans fell apart as the big cable operators and the seven Baby Bells began to realize they would be laying out hundreds of millions of dollars without knowing whether their subscribers would be ready to pony up on a regular basis for movies, games, horseplay and high-tech home shopping; the applications – what the industry calls killer apps – that will get marquee treatment along the infopike.

The technicians at the telcos and the cable systems also have developed permanent nervous twitches after a number of field tests in the past year or so, which unearthed more technological glitches than even the most pessimistic engineers had envisioned.

But in what Brown Bros. Harriman media analyst Jay Nelson calls a countertrend, Cablevision Systems Corp. – the sixth-largest cable operator in the country- in concert with US West – the Denver-based regional Bell operating company – are up and running with new state-of-the-art cable systems with the goal of providing video-on-demand movies and other program services as early as next year.

“We’ve always prided ourselves on being aggressive and staying a step ahead of the competition,” says Pat Falese, VP of sales & marketing for Cablevision Systems. The company says it will invest $243 million to offer a parallel service of 86 channels to the 194,000 subscribers in Fairfield County, Conn., who now receive only about 50 channels. Subscribers who are satisfied with the 50 channels they get now won’t have to upgrade to the new service.

Going interactive

Dave Banks, a spokesman for US West, says, “We don’t regard ourselves as bucking a trend. We’re just going forward with our Omaha activities.” US West is targeting the Cox Communications-owned cable system in Omaha by offering packages of cable nets at cut-rate prices. The plan is to add interactive services such as movies on demand by the first quarter of’ 96.

The US West trial, which will run for a year and cost about $75 million, already has caused Cox to go on the attack in Omaha, offering a 21-channel tier to subscribers as a freebie. The Cox system tier includes local over-the-air TV stations and a grouping of public-interest cable networks.

“The importance of these experiments by US West and Cablevision is that we’ll learn what people are interested in buying,” says Lynne Buening, VP of programming for Falcon Cable TV. The two experimenters “are also sending a message to Wall Street that they’re players in the new technology,” she says.

The more interesting of the two plans is Cablevision’s Connecticut overlay, because it theoretically allows subscribers to buy only the cable nets they regularly watch – once they agree to pay $9.95 a month for a no-frills basic service of over-the-air TV stations, the TBS superstation and information channels such as C-SPAN 1 and 2.

Under this formula, called Optimum TV, subscribers can buy each of the 31 basic-cable networks for $1.95 a month per net, which the industry calls a la carte. But most of these 31, plus a few more including ESPN, USA, Nickelodeon/Nick at Nite, MTV, VH1 and the Disney Channel, also are available at a volume discount: The subscriber gets them all in the Optimum Plus package for $29.95 a month.

Cablevision offers similar flexibility with the eight pay TV networks. Each is available at a retail price of $9.95 a month. But two of the eight – HBO and Cinemax – also are part of the Optimum Preferred package, along with two minipay networks (Flix and Encore) and two sports networks (Madison Square Garden and Sportschannel N.Y.), for $49.95 a month, a figure that includes all the networks in the Optimum Plus pack.

For $69.95 a month, Cablevision gives subscribers all 88 channels, including every one of the pay networks and access to all six pay-per-view channels.

The reason ESPN, USA, Nickelodeon/Nick at Nite, MTV and VH1 are available only in the Optimum Plus package and not a la carte is that their owners refuse to give Cablevision permission to sell them retail.

Howard Nass, senior VP of TN Media (formerly Foote, Cone & Belding), applauds these five ad-supported networks, claiming that if they agreed to go a la carte, “They’d lose too much viewership and damage themselves with the ad agencies.”

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