News

Gold Rush for HD Nets

8/24/2007 8:00 PM Eastern

As an independent programmer and underdog, The Outdoor Channel is accustomed to pursuing distributors, seeking contract renewals and increased carriage.

But during the past six months or so, some of the nation’s programming gatekeepers have been knocking on Outdoor Channel’s door, eagerly wanting to talk about its HD service.

“We are seeing a lot of interest from operators in our HD channel,” Outdoor chief operating officer Tom Hornish said. “I’ve gotten some cold calls from distributors that we already have relationships with, but they don’t currently have the HD feed, saying, 'How do we get it, what do we need to do?’”

Chalk up the change to DirecTV, as programmers enjoy a slight bit of newfound leverage because of the HDTV race.

Back in January, the satellite provider trumpeted its plans to offer as many as 150 national HDTV networks. The first wave of that expansion, with 70 HDTV networks, is set to debut in September.

FUTURE PLANS

Not coincidentally, DirecTV’s announcement was followed by a flurry of activity. Large and small programmers alike have unveiled plans to launch high-definition networks in the near future, with several set to debut on DirecTV.

The Walt Disney Co., NBC Universal, Discovery Communications, Starz and A&E Television Networks are among those with HD-network expansions planned. Most recently, Travel Channel, which Cox Communications wholly acquired in May, said it will debut an HD simulcast next year. (See story, page 30.)

On the distribution side, EchoStar Communications’ Dish Network and cable operators are trying to quickly ramp up their own HD offerings to compete against DirecTV. Earlier this month Dish got a jump on DirecTV when it launched Discovery’s four new HD services ahead of their slated debut date next month.

Dish, which now claims it has the biggest HDTV lineup in the nation, will also launch The History Channel HD Sept. 5, ahead of DirecTV, which claimed it would have it first.

The HD Field
Some of cable programmer’s high-def offerings:
Programmer New HD Networks Launch
SOURCE: Multichannel News research
Disney Disney Channel, Toon Disney, ESPNews, ABC Family 1st Quarter
Discovery Discovery Channel, TLC, Science Channel, Animal Planet August
NBCU USA Network, Sci Fi and Bravo CNBC Sleuth, Chiller 4th Quarter Early 2008 2008
Starz Starz Edge, Starz Comedy, Starz Kids & Family September
Travel Channel Travel Channel 1st Quarter
Hallmark Channel Hallmark Movie Channel 1st Quarter
A&E Networks History Channel September

SECURING BANDWIDTH

In this competitive landscape, where traditional standard-definition channels can’t get launched, high-definition networks are securing bandwidth on cable and satellite alike.

“DirecTV’s announcement has just set off a gold rush,” one affiliate sales chief said. “And everybody and their brother are piling on with HD channels, most of which, frankly, are going to be provided at no additional cost.”

Because of DirecTV’s plans, one affiliate-marketing expert said that cable operators need HDTV “content for competitive reasons, and therefore they’re moving very fast and they’re putting a lot of resources against getting deals done with these HD services. It’s like the Wild, Wild West right now.”

In this battlefield, some programmers said that having an HDTV channel gives them a new bargaining tool to use in negotiations with distributors.

“It’s not a hammer,” the affiliate marketing expert said. “But it can get the operator to the table and once you’re negotiating, it gives you an opportunity to trade horses.”

Even if a programmer isn’t paid a license fee for its HD network, it can use its newly sought-after service as leverage to try to secure better terms for its standard-definition channels, in order to get increased penetration and higher license fees, some network officials said. High-definition networks are also chits that can be used to help nail down new affiliation deals and contract renewals.

The Big Ten Network launches Thursday, Aug. 30, and is trying to line up carriage agreements. So, from launch, the network will have an HD service as part of its offering. And Hallmark Channel, which is negotiating contract renewals with its major distributors, just announced plans to launch an HD simulcast of its Hallmark Movie Channel next year.

“For us, it’s a major component of our renewal discussions,” said Janice Arouh, Hallmark’s senior vice president of network distribution and service. “I really want to underscore the word 'major.’”

To get the HD movie network, a distributor must carry Hallmark Channel, the core service.

Big Ten believes its HD network is a drawing card for its standard-definition service.

“We’re launching the channel, and we’re obviously trying to do deals with everybody, and as part of that deal we’re offering the HD channel,” said Mike Hopkins, Fox Cable Networks executive vice president and general manager of affiliate sales and marketing.

“I think it’s a big advantage,” he said. “We’ll probably have more high-definition events on Big Ten Network than any other sports network right out of the gate. The quality of those events is very good. You’re going to have University of Michigan football games in high-def, and Ohio State football games.”

But having an HDTV offering doesn’t guarantee carriage. Big Ten Network is still struggling to secure distribution deals. (See story, page 6.)

DRIVING VALUE

The Outdoor Channel is trying to negotiate carriage renewals now, so it welcomes having an HDTV channel as a way to at least open the door with distributors.

“Does that make us have leverage?” Hornish said. “I don’t know. But is there interest? Yes. I think everybody is focused on trying to become competitive in their HD offering, and frankly that happened about six months ago.”

Skeptical network executives played down the notion that the HD race is giving them any incremental leverage. Others claimed the ramp-up of high-definition, in terms of the creation of new networks and their success securing carriage, is being driven by consumer demand for HDTV, not DirecTV’s plans.

“My take is it’s very much related to the consumer adoption of HD television sets,” said David Preschlack, executive vice president of affiliate sales and marketing for Disney and ESPN Media Networks.

“[HDTV networks] are important, because it’s important from our customers’ perspective to deliver as much HD programming as possible, because of the investment that they are making.”

Disney already has ESPN HD and ESPN2 HD, and next year debuts Disney Channel HD, ABC Family HD, Toon Disney HD and ESPNews HD, most of which will be carried by DirecTV and Time Warner Cable. ESPN HD, launched in 2003, has 13.3 million subscribers.

Programmers, not just distributors, are under pressure on HDTV, according to several affiliate sales chiefs. They need to get their networks onto HD platforms, because that’s where consumers with HDTVs are going first when they turn on their sets, cable network officials said.

“I wouldn’t say the programmers have the leverage in gaining carriage of these networks,” said David Zagin, executive vice president of distribution for AETN. “It’s important for the programmer to be in that space. Most people who have HD wind up watching the HD signals first, so you don’t want to only be in [standard definition].”

Discovery helped pioneer HDTV with its Discovery HD Theater, which congregated programming from its various networks. But now Discovery is launching HD simulcasts of Discovery Channel, TLC, Animal Planet and The Science Channel.

Nature programming is one of the genres that viewers want to see in HD, and Discovery is addressing that need, according to Discovery Communications president of domestic distribution and enterprises Bill Goodwyn.

“We’re always trying to find how do we drive more value for distributors,” he said. “We’re not going to look at it as a leverage play. If you start nickel-and-diming [a distributor] on everything, you’re looking at a short-term business relationship. And that’s not what we’re after.”

Distributors asked Hallmark Channel to create a family-friendly HD network, and that’s why Hallmark Movie Channel HD, a simulcast of the standard-definition channel, will debut next year, Arouh said. She is in contract renewal talks for Hallmark.

“We will provide our distributors Hallmark Movie Channel HD first quarter next year, and we are not mandating carriage of Hallmark Movie Channel, the linear feed, but the economics are better if both services are launched,” Arouh said. “However, carriage of Hallmark Channel is required.”

CHILLER POTENTIAL

NBCU is launching HD simulcasts of USA Network, Sci Fi Channel and Bravo in the fourth quarter; CNBC HD early next year; and also plans HD simulcasts of digital networks Sleuth and Chiller, according to NBCU president of TV networks distribution Bridget Baker.

NBCU wants to be able to offer programming for as many platforms as are available, including expanded HDTV packages like those of DirecTV.

“When you’re in the position we’re in, of trying to get content distributed, the fact that someone says, 'Hey, I’m going to open up this giant platform and I’m going to go searching for some content to put on it,’ NBCU wants to be in the front of the line saying, 'I’ve got it for you,’” Baker said.

And HD simulcasts for the relatively new Sleuth and Chiller may drive carriage deals for their standard-definition versions, according to Baker.

“No one is banging down my door asking for Chiller HD or Sleuth HD,” she said. “But the fact that I can actually say in the beginning, 'Look, we want to grow these networks. We get that they’re never going to be 90 million-subscriber networks, but we want to get out there, and oh by the way, if you distribute their linear feeds, I can also marry an HD simulcast with it,’ that’s attractive.”

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