CABLE BIZ SEEING FLOODS OF TIERS

NEW YORK — Cable networks like the Cartoon Network, the Sci-Fi Channel and ESPN2 hate them, many cable operators are embracing them, and subscribers are mostly dazed and confused.

The subject of all this commotion is what the cable biz calls new-product tiers (NPT), separately priced groupings of between four and six channels that are designed to generate revenue beyond the expanded basic offerings. These tiers have become the talk of the cable business again this month because CTAM, the marketing society of the industry, released an elaborate study derived from information supplied by about 150 cable systems that have set up at least one NPT.

Among other findings, the study concluded that:

* The channels most frequently employed in NPTs are Cartoon Network, Sci-Fi Channel, ESPN2, Turner Classic Movies and Court TV.

* Cable systems typically offer five channels on an NPT and slap an extra retail price tag of, on average, $3.50 a month for the tier.

* The average NPT reaches about 38% of the subscriber base of the cable systems that market the tiers, although that percentage includes the systems like Time Warner Cable of New York City that added 12 networks and raised the monthly price by only $1, causing more than 90% of subscribers to pony up.

Lynne Buening, VP of programming for Falcon Cable TV, a large multisystem cable operator, says, “One big reason we’ve set up new-product tiers is that we just didn’t want to keep layering on more monthly fees to subscribers on expanded basic,” the tier that includes all of the mass-circulation networks like ESPN, CNN, MTV and Discovery.

“New-product tiers are often a good way to get addressable cable boxes into subscribers’ homes,” says Grace Ascolese, VP of research for CTAM. The cable boxes also allow subscribers to get access to pay-per-view movies and events, which can generate some needed black ink to help shore up the anemic cash flows of most cable operators.

Michelle Wilson, director of programming and marketing for Marcus Cable, a top-10 cable operator, says she’s rolling out NPTs to see which new networks capture the loyalty of her subscribers. But Ascolese says that new-network choices are diminishing as the programming industry becomes consolidated into fewer and fewer companies.

These companies regard NPTs as the equivalent of Siberia, and they tend to give their permission only if the alternative is not getting on the system at all.

“Most cable networks don’t want to go up onto these tiers,” says Gerald McKenna, VP of strategic planning for Post-Newsweek Cable, which owns more than 50 cable systems in the U.S. The programmers will often express their displeasure at getting tiered, McKenna says, by “not going out of their way to help us to market the new-product tiers.”

Doug Holloway, executive VP of network distribution and affiliate relations for USA Network and Sci-Fi Channel, says he has reluctantly permitted tiering of Sci-Fi on systems reaching about 7% of the channel’s 41 million cable homes.

“These tiers are not really working because people don’t understand them,” says Holloway. “They’re very difficult to market.”

Tiers would be easier to market if cable operators grouped them by category, the way Wilson says Marcus Cable does. Marcus NPTs include a sports tier made up of ESPN2, Classic Sports, Outdoor Life, Speedvision, Golf Channel and Fit TV.

But category tiers are the exception because, for example, “a sports tier would wipe out a minimum of half of your cable households” that couldn’t care less about sports, says Buening. “Why put all your programming eggs in one basket?”

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