Pay Networks Put A Premium on HD
Push To Add New Feeds, VOD and Content in High-Definition Speeds Up
by George Winslow -- Multichannel News, 6/1/2008 8:00:00 PM
As operators race to add scores of new high-definition linear channels and hundreds of hours of HD content on demand, premium networks are responding with a flurry of HD outlets this summer. The result is one of the biggest changes in the pay TV landscape since the 1990s when digital TV and satellite providers opened new capacity for multiplexed premium services.
HBO last summer announced plans to roll out 26 HD feeds. Since then, it has launched 19 and is currently testing the delivery of the last seven, which will become available to MSOs in late June. By the end of the year, HBO also plans to launch an HD on-demand product.
“This June, all of the HBO linear television feeds will be provided in high-definition, as well as standard-definition,” said Bob Zitter, executive vice president and chief technology officer at HBO.
| Premium | |||
|---|---|---|---|
| (In millions of subscribers) | |||
| Q1 | Q1 | Q4 | |
| 2006 | 2007 | 2007 | |
| SOURCE: SNL Kagan compiled by Starz Entertainment |
|||
| HBO | 28.2 | 28.7 | 28.9 |
| Cinemax | 12.0 | 11.9 | 11.8 |
| Showtime | 14.5 | 14.3 | 15.5 |
| The Movie Channel | 14.5 | 15.8 | 16.6 |
| Starz | 14.6 | 15.8 | 16.3 |
| Encore | 26.4 | 28.2 | 30.7 |
In July, Starz Entertainment will launch Encore HD, boosting its total linear HD channels to six, according to William Myers, the company’s president and chief operating officer. Recently Starz also expanded its HD on-demand offering from 42 hours to 136 hours.
Showtime Networks, which already offers four HD simulcast channels, and about 80 hours of HD content on demand, in August will add eight new high-def channels, for a total of 12, said Tom Christie, executive vice president of affiliate sales. By the first quarter of 2009, Showtime expects to add another 10 HD feeds, for a total of 22 HD feeds. At that point, all of its channels will be available in HD and SD.
Meanwhile, all the premium providers have been ramping up the amount of true HD content they provide on their feeds. When HBO launched its first high-definition network in 1999, about 45% of the content was in true HD, with the balance upconverted to 1080i, according to Zitter. Now about 85% of the content on HBO and Cinemax is in true HD and most of the other multiplexed channels offer 80% to 90% of their content in true HD.
“We’re exerting great efforts to be able to provide essentially all HBO programming in HD by the end of 2008,” Zitter said.
A similar story is happening at Showtime and Starz, which are now offering virtually all of their new original programming and theatrical films in true HD.
The push to add new feeds, ramp up HD on demand and offer the vast majority of content in true high-definition, reflects a larger realization among premium networks that homes with HDTV sets are helping drive subscriber growth.
“All of our research shows that there is a huge correlation between the consumer that has upgraded to an HDTV or is looking to upgrade and the interest in premium channels, with commercial-free, high-quality HD content,” said Christie.
Getting a good read on the penetration of HD sets or viewing patterns of HD content in premium cable homes is difficult, but Showtime Networks vice president of distribution strategy Joseph St. Jean said, “I recently looked at a sample of about 4 million subs and found that 37% of our Showtime subscribers received the HD feed.”
The demand for HD content may also help explain why most premium networks have seen healthy subscriber growth since early 2006, when they began making more HD simulcast feeds available.
Between the first quarter of 2006 and the end of 2007, HBO has grown from 28.2 million subscribers to 28.9, according to SNL Kagan, while Showtime’s subscriber counts increased from 14.5 million to 15.5 million and The Movie Channel expanded from 14.5 million to 16.6 million.
During the same period, Starz has grown its subscriber base from 14.6 million to 16.3 million and Encore has increased from 26.4 million to 30.7 million.
Only Cinemax declined, falling slightly from 12 million subscribers in the first quarter of 2006 to 11.8 million at the end of 2007, according to the SNL Kagan data.
“We’re in a good place right now because we can offer consumers the commercial-free HD content they want,” said Myers at Starz. “Movies are still one of the top two or three genres that people want to watch and original content is another.”
Satellite providers and telcos are also racing to add HD content, which is pushing cable operators to add this summer’s new HD channels to their lineups.
“If you look at the announcements by DirecTV to have 150 linear HD channels, [Dish Network] to have 100 and Verizon [Communications’ FiOS TV] to have 150, that is putting pressure on cable operators to find room for those feeds and roll out new technologies that will let them move from 50 to 100 and 150 HD channels,” said St. Jean.
To meet that demand, premium networks have had to expand satellite capacity and upgrade HD infrastructure.
Zitter said HBO was the first cable network to use MPEG-2 compression and it has now taken the pioneering step of embracing MPEG-4 compression.
That saves significant bandwidth for satellite transmission. But MSOs won’t be deploying MPEG-4 set-top boxes for several months and it will probably take years for operators to make the transition to full MPEG-4. To overcome that problem, HBO is using Motorola encoders and receivers that allow operators to take the HD channels in either MPEG-4 Advanced Video Coding (AVC) or MPEG-2 formats.
“We went with Motorola because they had a product last year when we were planning this,” Zitter said.
When HBO launches its HBO and Cinemax HD on-demand product later this year, it will offer MPEG-2 and MPEG-4 formats, Zitter said.
As part of its HD push, Showtime opened up a new broadcast center in July of 2007.
Last year, the custom facility, which was built by Globecomm Network Services, handled the launch of new HD service the Smithsonian Channel, and it is now handling the launch of the new HD feeds.
“The new broadcast facility gives us tons of capacity,” for the new HD feeds that Showtime will launch in August 2008 and early 2009, said Christie. The company will offer MSOs MPEG-2 and MPEG-4 feeds.
New technology to boost satellite bandwidth and capacity were also important for Starz’s plans to expand its linear and VOD content.
“We had a lot of affiliates asking for additional HD channels and on-demand content, but our satellite capacity was basically full,” said Starz senior vice president of programming operations Ray Milius. To solve that problem, Starz changed its satellite modulation to DVB-S2, which nearly doubled its bandwidth, and moved to use MPEG-4.
Starz is also migrating feeds to different satellite transponders so that it will be able to quickly add HD content in the future. “As the operators ask for more HD on demand content we have the flexibility to do things relatively quickly in about 90 says if we want,” said Myers.
