Nets Take Varied HD Paths12/08/2002 7:00 PM Eastern
It's going to take more than chump change to get ESPN HD off the ground, as its rollout will entail costs that one might not imagine.
For example, ESPN's world headquarters in Bristol, Conn., must be retrofitted in order for the company to launch high-definition service, according to Sean Bratches, ESPN's executive vice president of affiliate sales and marketing.
It will take what Bratches called "a significant capital investment" to transform Bristol from its current state as "an anachronistic analog facility" to one that's HD-ready. The "to-do" list includes some new studio sets.
set that we have today is not appropriate for high definition," Bratches said. "It just has too many flaws in it that high-def would pick up.
"I kid Chris Berman that we're going to need new high-definition anchors. Botox will be big. Buy stock now, that's my tip."
Out in the field, ESPN has HDTV production trucks, which are scarce, on order. And HD cameras must be installed in stadiums and other venues — and placed at higher spots than analog cameras, so they are in position to take in the full field.
"We have to buy seats in stadiums to do that," Bratches said. "There is a degree of complexity and cost to this that people don't realize."
Nonetheless, ESPN is taking the pricey plunge into HD next April when it launches ESPN HD, a simulcast of its flagship ESPN service.
ESPN is joining a group of programmers that have already opened their wallets for aggressive moves into HDTV, including the premium services Home Box Office and Showtime, the basic-cable Discovery Communications Inc. fiefdom and industry outsider Mark Cuban and his HDNet.
Just last week, HBO unveiled its plan to launch Cinemax HD in the second half of next year. Also in 2003, NBC Cable will be looking to launch an HDTV service, according to officials, while Scripps Networks will begin production of HD programming.
But some of the major programmers are sitting on the sidelines, dabbling in HDTV but not gambling on any major initiatives quite yet. That cautious, reticent group includes HBO sibling Turner Broadcasting System Inc., MTV Networks Inc., Fox Cable Networks Group and ABC Cable Networks Group, ESPN's sister company.
At least one cable-network official who asked not to be identified said it's too early for his company to make a big investment in an HD offering, in terms of consumer demand and the number HD TV sets in homes.
"There are huge questions to be answered about HD," the programmer said. "It costs a lot of money to do, and it involves a lot of bandwidth for distributors to commit."
Other cable networks said that the kind of programming they produce is not especially enhanced by high definition, so they see no need to plunge in now.
"We do not currently have plans to offer our networks in HDTV," an ABC Cable spokesman said. "The genres of programming in our portfolio [kids' programming and soap operas] do not lend themselves to being at the leading edge of HDTV rollout, as opposed to genres such as sports, adventure or feature films."
From the get-go, nature-adventure programmer Discovery has deemed it important to be an early HD player. Discovery sees its nonfiction programming as a natural for HD. As a result, it debuted Discovery HD Theater earlier this year.
"We can see that in movies, sports and documentaries viewers definitely get a bigger, richer, better experience in HD," said Discovery Networks U.S. new-media division president John Ford. "We've got to move along with the consumer."
Ford and Clint Stinchcomb, Discovery's vice president of new media, said the company wanted to have an HDTV offering in the market now that consumer demand is growing, prices for HD sets and set-tops have dropped and more content has become available.
"We realize we have to be slightly ahead of this curve, definitely not behind it," Ford said. "We'll risk being a little bit early in order not to be late. As productions roll off the line in the future, we'll have more and more in high-def. As many as we can afford, we're taking from standard def to high-def."
Also, since HD signals hog up bandwidth, Discovery officials believe it's important for basic-cable services to reserve slots early on.
"Speaking on behalf of all basic-cable programmers, we together don't want to see the broadcasters and the pay-TV services take all of the HD bandwidth while all of us in basic cable are standard def," Ford said. "That is not a good thing for basic cable."
Discovery HD Theater launched this summer with 125 HD titles. DCI chairman John Hendricks has directed his five analog channels to shoot an average 20 percent of their productions in HD from now on, cumulatively providing enough content to fill a 24-hour network, according to Stinchcomb.
Overall, the company said it plans to triple its original 110 hours of HD fare by December 2003. It'll take a step in that direction next month with the debut of 13 original hours. Some of the shows that will air in HD next month: Tournament of Roses Parade, Before the Real Eve
and Night of the Wolf.
HD is an expensive proposition for content providers. In terms of production alone, it can cost from 20 to 35 percent or more to shoot in HD, Stinchcomb said.
But programmers see HDTV as a way to help MSOs drive digital penetration, since subscribers need an integrated HD/digital set-top to view such programming.
Discovery charges operators a license fee for Discovery HD Theater if an operator offers the programming package along with the box. If the service is carried à la carte, it's subject to a revenue split.
Sports giant ESPN will charge distributors a monthly "technical provisioning fee" for ESPN HD, according to Bratches.
"It's a function of the extraordinary cost that ESPN is incurring to get into this business," said Bratches, who won't put a price tag on the charge, also opting not to discuss how much the Bristol upgrade will cost.
ESPN is also insistent that it does not want ESPN HD to be offered à la carte, but rather packaged in with other HD services.
"We don't think à la carte in the high-def world is a sustainable business model," Bratches said. "The way we see the market, a consumer would buy the digital box with the HD converter in it and with that, they would get the broadcast signals for free. And if they were a premium subscriber, they'd get HBO and Showtime as well.
"Then, they'd have an option to buy a package of high-definition services in addition to that for, say, $10. It would be populated by ESPN and other ad-supported type services."
HBO premiered its HD offering in spring 1999, moving early for several reasons.
"We thought it was gong to be important for cable brands, and a major cable brand like HBO, to be out there with a lot of HDTV strategically," said Bob Zitter, HBO's senior vice president of technology services. "And the people who are buying these sets — and right now there are about 4 million sold — are people who have previously had large-screen TVs in their homes.
"And they are also people who have been high-end customers of cable and [direct-broadcast satellite]. We looked at the demographics, and those are HBO subscribers."
Stinchcomb and Cuban both understand why some programmers are waiting to make their moves in HDTV, which doesn't offer an immediate return on investment.
"In the subscription HD business, we're talking about something where it's three or four years out before you turn a profit," Stinchcomb said. "As a private company, we [Discovery] can make that kind of investment. Mark Cuban with HDNet can make that kind of investment.
"But if you're a publicly traded company, you're subject to the quarterly pressures that come with being a publicly traded company. It's a difficult investment at this point to justify."
Nonetheless, General Electric Co.'s NBC Cable will take the plunge by creating an HD service, although details of its plans are sketchy. Cable programmers have to get in early with HDTV, according to NBC Cable president David Zaslav.
"Although the numbers are very small now, over time it's going to present a great opportunity to showcase programming," Zaslav said. "If you don't play in HD, over time you may be left behind, particularly in an environment where distributors are offering only a limited number of slots for HD."
Like Stinchcomb, Cuban — owner of the National Basketball Association's Dallas Mavericks and founder of Internet streaming-media pioneer Broadcast.com — acknowledged that HD is a long-term play for programmers. But that's why Cuban said he's "bullish" on HDTV while some traditional programming companies are holding back because it's not a quick-return business and could hurt their cash flow and stock prices.
"That is exactly what creates the opportunity for me to sneak in," Cuban said. "As far as the MSOs' and DBS perspective, they have customers who are seeing HDNet in stores and buying HD TVs expecting to see high-def when they get home.
"These are customers who spend more on services, pay their bills and don't churn. Multi-service providers have to compete for these customers."
According to Cuban, distributors "can't wait for traditional cable networks to determine that their financial situations are ready to support it [HD]. HDNet helps them compete and keep these customers happy."
HDNet, now carried on DBS by DirecTV Inc., will launch three new services this winter for sports, movies and entertainment, respectively.
Fox Sports Net is providing some sports programming for HDNet, according to Lindsay Gardner, Fox Cable's executive vice president of sales and affiliate marketing.
Fox Cable been working closely with HDNet and has done some testing with Cuban's company, Gardner said.
The News Corp.-owned programmer could reportedly also become a major source of content for Cuban's new HD sports network.
But apart from that potential HDTV foray, Fox Cable is focusing on video-on-demand before HD, Gardner said, because that's what cable operators are interested in.
"As sales people, we're listening to our customers and we're reflecting their priorities," he said. "And VOD today is more of a priority to our distributors, among their top priorities. Over time, HDTV may similarly be a top priority. And we'll adjust our resources and our efforts to reflect that."
Fox Cable owns a stake in National Geographic Channel, which has begun producing select projects in high definition. But the network is concentrating on making the transition from an emerging to a mid-sized network, and improving and enriching its programming, rather than moving into high definition, said Andrew Wilk, NGC's executive vice president of programming.
"That investment we'll make somewhere down the line," Wilk said. "I don't think people are running out to stores to buy high definition TV sets."
Turner and Viacom Inc.'s MTV Networks have also been low-key in terms of their HDTV efforts.
"We're experimenting," a Turner spokesman said. "We're playing with it, in the areas of sports and movies."
MTVN's VH1 produced some of the footage for its now-defunct reality series tracking Liza Minnelli and David Gest in high-definition format. But the MTVN cable group hasn't announced any major HD initiatives, either corporately or for its individual networks.
"We are keeping a close eye on the development of HD and looking at what CBS, a leader in the field, and Showtime are doing," an MTVN spokeswoman said, referring to two Viacom sister companies.
In contrast, both NBC Cable and Scripps — parent of Home & Garden Television, Food Network, Fine Living, Do It Yourself Network and Shop at Home — plan to venture into HD next year.
"Given the small number of homes that have been able to receive high definition signals up to this point, we have felt it was premature to be aggressive about developing HDTV content," said Susan Packard, Scripps' president of new ventures. "The environment is changing somewhat now … With the movement we are seeing on this front today, we intend to begin production of HDTV in 2003."