Signaling a move toward becoming a bigger force in the music industry while significantly raising its profile with cable viewers, the Box has merged with TCI Music.
The $38.5 million pact also portends the addition of a national signal, to go with the Box’s existing localized pro-gramming services, which could eventually become the latest would-be challenger to MTV.
It can also be seen as a Bronx cheer aimed at Viacom and its MTV Networks which have been battling with TCI over carriage issues ever since TCI announced plans to create a music channel that would likely compete with MTV. (Daily Variety, Sept. 17, 1993).
Though a similar deal was attempted a year ago and fell through, the two companies have signed a binding letter of intent for the merger, which is expected to take several months to consummate and must still pass the requisite regulatory muster.
Technology in place
The merger gives TCI the resources, expertise and technological infrastructure of the Box, the industry’s only 24-hour interactive all-music video service, to instantly put TCI Music in the music vidchannel game.
TCI Music will also launch in the coming months a “music multiplex system” that can offer several musicvid and audio channels, as well as offer original music programming that can compete or offer an alternative to existing music vid channels, such as MTV, TNN or VH1.
The two entities also have their sights on delivering audio and video via the Internet.
Under the terms of the deal, the Box would become a wholly owned subsidiary of the recently bowed TCI Music, an arm of giant Telecommunications Inc.
The TCI deal will also return the Box to the airwaves in New York, where Time Warner yanked it from its sys-tem.
Industry insiders suggested the Box’s potency was diminished by not being on the air in New York, a city critical to breaking artists across many genres.
TCI Music was formed to advance the cabler giant’s music-based programming interests and seek out alliances or make acquisitions. Parent TCI is the nation’s largest cable TV operator.
The Box nab complements TCI’s recent acquisition of DMX, a digitally delivered CD-quality music provider that offers a wide range of music programming channels.
But unlike MTV, which is a one-size-fits-all operation, the Box can be programmed to offer musical genres that appeal to audiences in specific geographical regions.
Viewers program the Box via telephone by calling telephone numbers that permit the selection of their favorite music videos in five genres: pop/rock, MOR, country, Latin and hip-hop/urban, the latter among the cabler’s greatest revenue generators. The cost for the vids are charged to the caller’s telephone.
In a musically diverse community like Los Angeles, for example, the Box can be programmed to offer vids from adult contemporary artists to homes on the Westside, hip-hop acts to residents of South Central and country crooners to viewers in Simi Valley.
The Box, which currently reaches more than 30 million homes, also recently completed its system-wide up-grade to digital distribution with local file servers that are accessed through a two-way satellite system.
“We created a great foundation, and this (deal) positions us to become a bigger force in the music business and another important avenue for record labels to expose their artists to the public,” said Alan McGlade, prexy/CEO of the Box Worldwide.
Glade characterized the merger as “the next logical step in our evolution, and will permit us to launch new serv-ices, enhance existing programming while we fill untapped niches. All of which will heighten our impact in the TV and music industries.”
Record label marketers credit the Box with leading the charge in promoting R&B/urban artists and competing ef-fectively with such outlets as Black Entertainment TV in the genre. But its impact in other genres is still evolving.
However, the unqualified success in the urban arena has forced marketers to take notice of the cabler’s viability in breaking artists, and as a result many have added the Box to their promotional arsenal even when working other genres.
“We are going to be very label-friendly and offer the established (use) of the box while experimenting in a num-ber of directions,” David Koff, prexy of TCI Music, told Daily Variety. “We don’t view it as going head-to-head with MTV, as we will offer promotional aspects that it cannot.”
The Box expanded last month, and launched a country music channel. It still offers merchandise and special prod-ucts such as compilation discs to viewers, and has created a brand name.
Terms of the deal
The terms of the stock swap provide that each share of common stock of the Box would be worth $1.50, and would be exchanged for shares of TCI Music series “A” preferred.
Those shares would be exchangeable for three shares of TCI Music common stock.
TCI initially teamed in a joint venture with BMG in 1993 to create a music channel that would program vids in a shopping channel-like environment.