HITS Tinkers, Readies More Nets

8/02/1998 8:00 PM Eastern

Tele-Communications Inc.'s Headend in the Sky launched
its rejiggered program lineup last week, and more changes are in store this fall, when the
service adds a new batch of digital networks with powerful brand names behind them.

The final lineup that HITS rolled out last Tuesday had a
number of updates and changes from the preliminary list that was sent to affiliates in

Lifetime Movie Network, CNN/SI, Discovery Wings and
Discovery Health were added to the final lineup. And Health TV -- a sampler channel of
various health-related services that was supposed to be dropped from HITS -- is instead
staying on its roster.

Also last week, Prevue Networks Inc. officials said they
will be issuing a new, more attractive rate card for Prevue Interactive, the on-screen
guide that's used as the navigator for HITS. Smaller cable operators that want to
deploy HITS were complaining that Prevue Interactive's planned minimum
$800-per-month, per-system fee was prohibitively pricey, and that it would hamstring
digital rollouts.

In October, two of HITS' 12 transponders, Nos. 5 and
6, will open up when Viewer's Choice moves its pay-pay-view channels to its own pods,
said Rich Fickle, HITS' senior vice president of business development. This will
permit HITS to add between 14 and 19 new networks to its lineup.

"We're working with operators on what they'd
like to see in the next round," Fickle said. "We're interested in a lot of
the new channels that are launching this fall. We're in the middle of negotiations
with a lot of those networks."

Fickle declined to say specifically who he is talking to.
But several HITS affiliates said he is in talks with programmers regarding: The Walt
Disney Co.'s Toon Disney; Rainbow Media Holdings Inc.'s AMC's American Pop;
A&E Networks' Biography and International History channels; E.W. Scripps
Co.'s Do-It-Yourself; E! Entertainment Television's Style; Nickelodeon's
Noggin and its other digital spinoffs; and MTV Networks' The Suite from MTV and VH1,
six music-video networks anchored by a seventh, M2: Music Television. Noggin, the Nick
spinoffs and DIY don't launch until next year.

One operator expressed enthusiasm about having networks
like those, which have significant brand names attached to them, added to HITS.
That's because operators want brand names to help drive digital penetration. It is
expected that the new brand-name digital networks will mainly be grouped on HITS
transponder 5, where Lifetime Movie Network is now slotted.

Officials at both smaller MSOs and Prevue expressed
optimism last week that they will be able to come to an accord over Prevue
Interactive's pricing.

About three weeks ago, Prevue sent its affiliates a letter
notifying them that Prevue Interactive's license fee was going to be 30 cents per
month, per subscriber, or a minimum of $800 per month -- a figure that was first floated
late last year. Prevue was also only seeking three-month deals upfront, and not the usual
lengthier contracts.

Those terms made small operators, such as chief operating
officer Ron Martin of Buford Cable TV, see red. They said the $800 monthly minimum for the
interactive guide made the economics of digital, and of rolling out HITS, far too
expensive for systems with 10,000 subscribers or fewer.

But after getting feedback from small and large operators,
Ed Knudson, vice president of Prevue Interactive services, and Peter Boylan, president of
Prevue parent United Video Satellite Group Inc., said they were trying to resolve the
issue. UVSG is controlled by TCI.

In fact, Knudson said, Prevue Interactive will be issuing a
new rate card -- which he wouldn't disclose yet -- in which Prevue is basically
willing "to shoulder the burden, even if it takes a few years to cover the
costs" for the interactive guide until digital really ramps up.

"We're in a starting place with digital,"
Knudson said. "Right now, [the $800 monthly minimum] is tough to swallow [for
operators]. So we went back to the drawing board."

Prevue Interactive will also most likely offer operators
one-year deals, according to Knudson.

HITS, which now has deals with 40 non-TCI MSOs, said in May
that it was making a number of changes to its lineup, effective July 28. HITS said it was
adding a new Spanish-language network tier from Liberty Media Group, as well as an urban

HITS also said back then that it would add ZDTV and
WeatherScan by The Weather Channel, and that more add-ons would be announced. And as part
of the tweaking, HITS grouped more DMX audio channels together on pods, rather than
spreading them out.

Canales n, Liberty's Spanish tier, will actually
launch this week via HITS on several TCI systems in Pueblo and Greeley, Colo. Between
August and September, Canales n will be in front of 1 million TCI subscribers, which
include 300,000 to 400,000 Spanish-speaking homes, said Liberty Media vice president David
Jensen. This includes rollouts at additional TCI systems in Colorado, Texas, New Mexico,
Oklahoma and Iowa.

"The first launch wave is really big," Jensen
said. "And we think that this is going to change the viewing habits in
Spanish-speaking homes."

The package, priced at $6.99 per month, includes CNN en
Español, Discovery en Español, Fox Sports Américas, CBS TeleNoticias, CineLatino, Box
Tejano, Box Exitos, Canal 9 and eight Latin DMX digital-audio channels.

Liberty also plans to add a female-oriented network to the
Spanish tier, as well as a kids' network "that had a famous brand
attached," Jensen said.

Nearly all of the HITS pods will be moving to a new
satellite in the fall, Fickle said. That's when Viewer's Choice will move off
two HITS transponders and onto its own. The transponders on the new satellite will have a
wider bandwidth than the current ones, he added.

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