Cable stable stalled by economy

Lack of private-equity coin is main hurdle

“Getting a new cable network launched these days is like climbing Mount Everest during a freezing snowstorm.”

That statement, by Lynne Buening, the veteran cable consultant, comes out of her painful experience advising startup networks pounded by a business climate that’s brutally harsh for wannabe program services.

There are lots of reasons for the grim environment facing these gestating channels. The biggest hurdle: Private-equity funding for new networks has all but disappeared.

Even though a number of cable operators were interested in signing up for Pridevision, a network dedicated to programming for gays and lesbians, the capital markets rejected it. Pridevision, already in operation in Canada, couldn’t come up with enough money to pay U.S. cable operators the launch fee needed to get the channel off the ground in the States.

Wall Street “has become risk-averse,” says Cathy Rasenberger, Pridevision’s consultant and president of Rasenberger Media, which helps cable networks get carriage.

Potential investors insist on guaranteed subscriber commitments before laying out money to a new network, Rasenberger says.

But cable operators won’t offer those commitments unless the network can prove it’s got blue-chip funding. As she says, “It’s a chicken-and-egg situation.” Deprived of subscribers, the network ends up laying all the eggs.

“Venture-capital dollars have dried up to the point where there’s not even a drip,” says Buening. “Nobody with money is willing to jump off the end of the diving board in this climate.”

Parched money markets are not the only obstacle. Politics also plays a role.

A number of cable operators have stopped buying new networks for a powerful reason: Washington and the courts may force cable systems to carry all of the digital signals that local broadcast stations are putting together.

If forced carriage of all of these signals becomes the order of the day, digital bandwidth will get so swamped that there’ll be no room on cable systems for fresh cable networks. Even existing — and underperforming — cable networks could get jettisoned.

The networks themselves are not making it any easier for the operators to buy them. As the old ad slogan phrased it: Where’s the beef?

“We’ve seen lots of music channels and sports channels and spinoffs of the Discovery Channel,” says Mike Egan, a longtime cable consultant and partner in Renaissance Media. “But none of them seem to have caught the imagination of viewers, or driven people to buy the digital boxes.”

“I call it the quality factor,” says Buening. “The digital world hasn’t produced one signature network, not one breakout network.”

And that’s what operators are searching for, to use as a lure not only to harvest new digital subscribers but to stop existing digital customers from becoming disgruntled and canceling the service.

As Buening puts it, “To get carriage today, a new network will have to be kick-ass and rock-your-world.”

That’s a tall order when the sour economy forces program budgets to get pared down to supermodel slimness.

Even the media companies that own scores of cable networks are much more cautious about cobbling together spinoff programming services and leaving themselves open to a thumbs-down by cable operators.

Instead of creating a network from scratch that would target black viewers, Viacom bought BET and added the 22-year-old network to its existing cable lineup, including MTV, Nickelodeon/Nick at Nite, VH1, TV Land and Spike TV (formerly TNN).

But not every cable-network entrepreneur is washing down daily rations of Prozac.

“It’s no harder to sell a cable network than it was three years ago, or five years ago,” says Stan Hubbard, chairman and CEO of Moviewatch, a network still awaiting a firm launch date after its parent Hubbard Broadcasting first announced the service — in October 2000.

The network, which focuses on news, features and other original programming about the movie industry, has signed carriage deals with Time Warner Cable, DirecTV, Insight Communications and the National Cable TV Co-op. Moviewatch will be a freebie to operators that agree to launch it on systems reaching 20% of their subscribers.

Hubbard says his optimism is high because he can afford to put off the start date until Moviewatch chalks up enough guaranteed subscribers to make it salable to advertisers. The network’s only revenue stream will come from the sale of 30-second spots.

But the delay in Moviewatch’s launch shines a spotlight on the agonies suffered by developing networks hell-bent on creating a successful business: It’s a bitch to clear even when you’re giving the damn thing away.

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