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Starz Gains Traction Among MSOs

6/01/2003 8:00 PM Eastern

It's been a long time coming, but John Sie, Starz Encore Group chairman, chief executive officer and president, can point to an MSO-wide SVOD deployment deal. Two deals, in fact, were signed in May with Insight Communications and Charter Communications. But SVOD carriage is only one of many issues (Comcast lawsuit, Liberty's interest in Vivendi) Sie has on his plate these days. Perhaps just as critical is some of the fine print he wants to clean up on the plug-and-play agreement signed last December by cable MSOs and the consumer-electronics industry. An edited transcript from Broadband Week editor Matt Stump follows:

MCN: You've finally gained some momentum lately with the Insight Communications and Charter Communications SVOD deals. How did those two deals come about and what will those companies do with Starz SVOD?

Sie: The Charter deal is bigger in size and we are very happy with the rollout with SVOD. We are starting in St. Louis. They are going to do the transformation mode, where every Starz SuperPak subscriber will come automatically with Starz On Demand.

And with the Charter deal we have the Encore movie deal with the thematics as a driver for their digital tier as well as Starz MoviePak [which] will be incorporated in the premium offering.

Insight is even more dramatic in terms of how they are going to package it. There, the Starz thematic will be part of their digital movie tier, which will be the drivers like in Cox, where the majority of people that go to digital will have Encore thematics imbedded as part of the digital tier.

In addition, in the premium offerings, Starz MoviePak will be coupled — we call it transformed — with Starz on Demand for $10, which is pretty much how you charge for other premium service without an on-demand component.

We're quite excited about those two. We'll be in 100% of Insight systems. Insight has been an innovative technical leader and we're so happy to have done that kind of positioning — which will transform pay TV into an on-demand period in a few years.

MCN: Any progress to report at Cox and Time Warner Cable?

Sie: We're still talking. They are very much interested, certainly Time Warner is. It's a matter economics and we have to work something that works for both of us.

MCN: The Comcast situation is held up with the lawsuits that are going on, but the irony is that Comcast seems to agree with the basic SVOD economic model you are pursuing, which is no separate fee for premium SVOD.

Sie: If you separate the litigation from running the business, which is what we do, we have the lawyers who handle our legal situation. Meanwhile Comcast is a huge affiliate of ours. So we want to make sure on-demand is part of their equation to move digital and retain digital customers and reduce churn.

Comcast is very good in that we both believe in transformative SVOD and the question now is economics. We feel very strongly that movies, premium movies, Oscar-winning movies is the driver to incorporate with Starz MoviePak as well as Starz On Demand.

We have, on average, twice the number of movies as HBO or Showtime. So we are clearly the movie guys and movies can clearly displace home-video rental habits.

MCN: Does it frustrate you that it's taken this long to get MSO deals?

Sie: I don't think so. I have patience. MSOs have to pay attention to video growth. It's quite dangerous for cable today to concentrate on high-speed access and put digital video on the back burner. Our point is: If you don't pay attention to video growth, you're going to lose it to the satellite people, particularly if Rupert [Murdoch] gets DirecTV. They are going to compete with EchoStar very fiercely and cable will be the loser if they don't pay attention to digital video.

MCN: I know you've got some particular views on the-plug-and-play accord that the cable industry signed with the consumer-electronics crowd in December. What are your concerns?

Sie: I think the plug-and-play agreement is a landmark agreement for the cable industry to get consumer electronics to the table so that over a long period of time you'll not only get digital product from Hollywood, you can also minimize set-top costs by forwarding it to the consumers. That is a very positive direction.

Within it, we find one small mistake, and that's what we've commented on.

MCN: Which is?

Sie: The Digital Millenium Copyright Act outlines very clearly what kinds of programming should be 'copy never,' 'copy once' and 'copy as much as you want.' In the area of 'copy never,' it clearly defined PPV transactional. In 'copy once,' it talks about premium and subscription services, like HBO, Starz or Showtime.

[In the plug-and-play deal] once it came to SVOD, people made the classic mistake of thinking whereever the word VOD is, it's transactional, so therefore they lumped the SVOD into 'copy never.' Clearly the same program that's on the linear schedule is also on Starz on Demand. We just believe from a practical point of view, 5C was the base for the MSO-CE negotiation. But 5C made a mistake when they looked at SVOD, [because] they thought of [it as] transactional. They erroneously put that in the 'copy never' and the MSO-CE talks didn't change it. We brought that to the attention of the FCC and we'll probably go on to Congress to make that point clear.

We need to cover our bases because this is cable's future. You don't want to offer a better consumer convenience where the consumer has control, but he has less copy rights than the subscription linear channel.

MCN: It seems the impetus is that content forces are trying to get the "copy never" protection extended as far as possible, and they are certainly concerned with peer-to-peer video sharing. Is Hollywood overreacting here with SVOD?

Sie: I think that is a misplaced general paranoia. We agree 100% with Hollywood that the programming should never be peer-to-peer, shared to go back on the Net, and technology would be created to prevent that. What we're talking about is when the consumer has already paid for a monthly subscription service, they should be able to time-shift it once. Now once they've time-shifted it, they cannot put it back on the Web because it now becomes 'copy never.'

The SVOD service is constantly changing. It's not static, because there is limited server space for each one of us. So a consumer doesn't know when a program is going to be off the server, so they should have the right, at any time, to copy it once for time-shifting use.

MCN: Did you get 'copy once' rights for linear Starz and does that carry over for SVOD?

Sie: Regardless of whether we have it or not, if it's in the regulation— 'copy never'—I can assure the studios will say: 'The government made us do it.'

We don't mind if the government doesn't get involved at all. But if the government is going to get involved, they better be consistent so they don't screw up the consumers' expectations.

MCN: How good of a chance do you have to win on this point?

Sie: If logic makes sense, I win it 100%.

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