News

Making It There -- on Digital

2/20/2000 7:00 PM Eastern

New York -- Time Warner Cable officially launched digital
cable on its 1.2 million-subscriber flagship system here last week, buoying distribution
hopes for several programmers that won coveted slots on the nation's largest cable
system.

Branded "DTV," the package includes 30 new
channels, six premium multiplexes and four near-video-on-demand channels that will offer
pay-per-view movies with new starting times every half-hour.

The package launched initially in Queens, and it will be
extended to parts of Manhattan this spring. Predicting that the system it would sign up
100,000 digital subscribers by the end of 2001, Time Warner said the package will be
available in all of Manhattan by this fall, but it won't reach parts of Brooklyn
until spring 2001.

Programmers winning slots in the new lineup include
Sundance Channel; Newsworld International; Bloomberg TV; The Golf Channel; Speedvision;
Outdoor Life Network; Trio; Gems Television; The Health Network; Fox Sports World; Fox
Sports World Español; Style; Odyssey, A Henson & Hallmark Entertainment Network; and
International Channel.

Discovery People and Discovery en Español were the only
two digital channels offered by Discovery Communications Inc. that didn't make the
cut. Time Warner agreed to carry Discovery Kids, Discovery Science, Discovery Wings,
Discovery Civilization, Discovery Home & Leisure and Discovery Health.

While Time Warner may be the first system to carry both The
Health Network and Discovery Health, the system passed on Oxygen and new kids'
digi-nets Toon Disney, Fox Family Worldwide Inc.'s boyzChannel and girlzChannel and
Noggin.

"Until there's an umbrella agreement [between the
networks and Time Warner's corporate office], we can't consider them," Time
Warner Cable New York City general manager Barry Rosenblum said.

"Just because they're not there at launch
doesn't mean that the lineup won't be freshened up at some point in the
future," he added.

Time Warner is deploying a mix of Scientific-Atlanta Inc.
"Explorer 2000" and Pioneer New Media Technologies Inc. "Voyager"
digital set-tops for the rollout, and it is using Pioneer's interactive program
guide.

Time Warner New York subscribers have an average of 1.5
analog set-tops installed in their homes, and the operator expects that "most
households will switch out whatever they have for digital," Rosenblum said.

The system usually charges $6.50 per month for a second
set-top, but will only charge $1 for second boxes for its digital rollout, he added.

As would be expected, programmers that made the cut were
pumped last week. Some of those that didn't make it onto the system said they remain
hopeful that they'll eventually make it in New York.

"It gives us visibility, and it has a ripple effect on
national ad sales," said Becky Ruthven, senior vice president of affiliate sales for
Speedvision and Outdoor Life. Ruthven declined to comment when asked if the company is
paid cash in exchange for carriage, but Multichannel News has reported in the past
that such payments are part of the network's distribution strategy.

The New York system passed on Outdoor Life competitor The
Outdoor Channel, which offers affiliates marketing support, but no cash for carriage.
Outdoor Channel CEO Andy Dale said he was not upset that Time Warner didn't launch
the channel in New York, noting that the MSO launched the network on 73 other systems.
"Maybe we'll be launched later," he added.

Rosenblum said he thought Outdoor Life was a better fit for
his urban market. "Outdoor Channel we felt was a little bit too rustic for what
we're doing," he added, referring to its core focus on hunting and fishing
shows.

Time Warner used surveys that it distributed to subscribers
in 1998 -- before it launched its "MetroChoice" advanced-analog package -- to
help come up with the digital lineup, Rosenblum said.

He wanted to add many of the channels then, but the system
didn't have enough capacity at the time, he added.

Asked how much of a factor cash for carriage was in his
decision-making, Rosenblum said, "You need to reach an agreement that's right
for both sides. But if we're not interested in the channel, we don't take it to
the next level."

Golf was one of the networks that missed the MetroChoice
cut two years ago. "This is a great opportunity for our channel," Golf senior
vice president of U.S. and international distribution Jim Bates said. The network is now
approaching 27 million U.S. subscribers.

Odyssey lost more than 1 million subscribers in January
1999, when Time Warner dropped it from basic and picked up MSG Metro Guide. It may be
several years before Odyssey reaches the distribution level it had on the New York basic
package, but chief operating officer Lana Corbi was nonetheless pleased.

"Based on what I have seen in terms of all of the
networks that are included, my feeling is that it will catch on and catch on pretty
quickly," Corbi said. "Certainly, we think there's an opportunity to move
down to basic at some point in time." New York is the only cable system in the
country with Odyssey on digital.

The MetroChoice networks -- Turner Classic Movies; The
Independent Film Channel; CNN/SI; ESPN Classic; TV Land; Animal Planet; WAM!
America's Kidz Network; Ovation - The Arts Network; Travel Channel; BET on Jazz; and
Crosswalks -- are also in the digital package. The 170,000 Metro Choice subscribers will
be charged an additional $6.75 per month to upgrade to digital.

Time Warner's entry-level digital package costs $9.95
per month on top of the standard service charge of $36.30. Digital pricing ranges from
$16.90 for digital plus one premium multiplex to $37.90 for digital plus six premium
multiplexes.

Time Warner is also offering a $99.95 package that includes
Road Runner cable-modem service, DTV and four multichannel premiums.

The launch comes eight months after Time Warner's
first digital launch in Austin, Texas.

Since it's facing video and cable-modem competition
from RCN Corp. in New York, as well as digital-subscriber-line competition from Bell
Atlantic Corp., some may wonder why Time Warner waited until now to roll out digital in
New York.

"This is Broadway, and you don't open your show
on Broadway first," Rosenblum responded. "We wanted to see how the software
works, how the product is received and make sure all of the bugs are worked out. And when
all of that happens, that's when you roll it out in front of what I consider the most
discriminating customers in the world."

Rosenblum passed on new interactive services from the likes
of WorldGate Communications Inc. and Source Media Inc.'s Interactive Channel. And it
will be one to two years before the New York system launches another Time Warner pet
project -- true VOD.

While Time Warner is testing cable telephony in Portland,
Maine, the New York system has no set timeline for launching telephony, Rosenblum said.

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