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Cablevision Still Bullish on iO

4/28/2002 8:00 PM Eastern

On an unseasonably hot mid-April afternoon, Cablevision Systems Corp. vice president of digital product management Kristin Dolan and executive vice president of engineering and technology Wilt Hildenbrand sat in the latter's office, posturing about whose sports car would win a drag race.

Dolan asked a guest to excuse their exuberance, but Cablevision earlier that week had successfully launched its digital cable service, dubbed iO: Interactive Optimum, in Morris County, N.J., its first digital cable market outside its Long Island base.

The New Jersey launch closely followed a drop in iO's monthly price and an overhaul of the service's navigational software that is aimed at luring new customers.

Although driving video-on-demand and subscription VOD penetration rates among existing digital-cable customers is also a goal, Cablevision's top priority is to "get the product out there and meet the numbers — and then drive revenues later," Dolan said.

When Cablevision launched iO on Long Island last fall, an introductory letter received a 6 percent response rate, which Dolan called "extremely high."

To further promote digital, Cablevision currently runs extensive cross-channel ads featuring sleek image spots, as well as newspaper and radio ads.

In mid-April, Cablevision's marketing team was also editing a 10- to 15-minute infomercial on digital cable that the MSO plans to unveil at the National Show, Dolan said.

Dolan acknowledged that all the press surrounding Cablevision's standoff with the Yankees Entertainment & Sports Network "didn't help" its digital marketing campaigns, but noted that it was not a digital-specific problem for the MSO. And the lack of a package for Major League Baseball's New York Yankees won't keep Cablevision from extending dish buy-back campaigns, she said.

By most accounts, Cablevision's digital rollout has gotten off to a slow start, following a number of disappointing product delays.

The MSO has not updated its digital subscriber numbers beyond its 2001 year-end count of 17,200. Subscriber guidance remained at 125,000 to 150,000 for 2002, but Cablevision might revise those numbers upward next month during an upcoming earnings call — if top management is as optimistic about iO as Dolan and Hildenbrand appeared to be.

LAST TO LAUNCH

After a number of delays, Cablevision became the last major MSO to introduce a digital cable product when it rolled out the service late last September.

It is now under enormous pressure from Wall Street and the cable industry to make good on its promise to deliver more than just the electronic programming guide and incremental cable network feeds that other MSOs deployed when they bowed digital cable.

Hildenbrand admitted that the company could have waited even longer if it had held out for the software it wanted to include with the launch of its Sony digital set-top boxes.

In the end, Cablevision and Sony decided to launch to start getting consumer feedback.

"We slowed down in the fourth quarter to get comfortable and to get the new software," Dolan added. "We wanted people to have a good experience from the get-go."

Because new software codes can be sent to customers' boxes in the middle of the night, digital receivers in the field will not be rendered obsolete once Sony and Cablevision introduce fixes to the product.

Earlier in April, Cablevision pushed the new code to most of its digital set-top boxes in consumers' homes. In a small percentage of digital households, the download didn't take — for example, in homes where the set-top was plugged into a wall switch with the power turned off for the night.

WHERE'S MY CLOCK?

Customers who didn't get the automatic software push could easily reboot their set-top box after calling an automated customer service hotline, Dolan said.

Cablevision got plenty of feedback on the digital boxes from early adopters. The software fix was meant to address concerns over picture pixelization and clunky on-screen navigation. But other concerns popped up after the new code was pushed to customers' homes.

Cablevision executives heard how vehemently some subscribers prefer to see the channel number displayed on the front of the set-top box, rather than as a time stamp that replaced it during the software switch. Ultimately, Cablevision plans to make the information displayed on the front panel user-defined, Hildenbrand said.

Cablevision hasn't run into VOD-related bandwidth problems, since the company waits to introduce digital cable until a particular system is upgraded to 750 megahertz with node sizes as small as 500 homes.

Like other VOD services, Cablevision's lineup starts with theatricals. The company negotiates directly with movie studios, rather than through a third party, and has VOD deals with every major Hollywood studio, Dolan said.

The company also proffers subscription VOD packages from premium movie services like Home Box Office, Showtime Networks Inc. and Starz Encore Group LLC on an a la carte basis for $4.95 each per month, on top of the premium multiplex package.

Cablevision had included SVOD in the monthly price, but recently broke it out to offer the more affordable $9.95 entry price for digital.

CLEANS UP EPG

As part of the software download, Cablevision cleaned up its EPG, introducing new portals for different types of on-demand content, including new menu screens for SVOD.

Cablevision's programming arm, Rainbow Media Holdings Inc., has developed a host of niche on-demand services under the Mag Rack umbrella to beef up the MSO's free on-demand content, which helps to condition consumers to watching non-linear TV content. Mag Rack is being pitched to other MSOs.

Cablevision also partnered with local Public Broadcasting Service affiliate TV Thirteen to develop a new Thirteen on Demand service.

The company wants to develop a strong on-demand lineup to avoid the high digital churn rates experienced by other MSOs, Dolan said.

The updated EPG promotes recent VOD hits and Mag Rack titles on a scroll at the bottom of the screen, which at other times displays weather updates. Hildenbrand said the space may also be used for news, sports and stock quotes, and one day could be subscriber-customized.

Cablevision has already started testing its digital telephone service that connects to the digital set-top box, he said.

Because each Sony digital cable box is installed with three USB ports and two IEEE 1394 ports, it can be upgraded to develop digital music download devices with Sony and other consumer electronics manufacturers, Hildenbrand said. Digital cameras also could be connected to a port on the front of the set-top box for future use with the company's Photo Center enhanced TV service.

The MSO decided to use the term "enhanced" rather than "interactive" whenever possible because research indicated that consumers felt interactivity could prove too complicated or crash their sets.

Cablevision has also worked with providers to develop other content. Through a virtual channel called TechTVi, the programmer provides instant access to more than 1,000 technology product reviews, beneficial not only to subscribers but to salespeople at Cablevision-owned consumer electronics retailer The Wiz, which demonstrates the set in markets where digital cable is available.

Elsewhere, the company's Metro Traffic Center lets viewers plot their routes in real time, rather than waiting for periodic traffic updates.

Although they generally don't boast linear program schedules, VOD and enhanced television feeds have their own channel numbers, are listed on the EPG and can be added to a subscriber's favorite channels list, Hildenbrand said.

"At the end of the day, this is TV, and people surf," he added. "It's an interesting thing to teach people to use menus."

25 HELP SCREENS

If the features of the digital box seem overwhelming, customers can turn to one of the 25 on-demand help screens, Dolan said.

Cablevision's professional installers also make it a point to teach customers how to use VOD. The MSO will move to a self-installation model later this year, providing a foldout sheet with instructions on how to access VOD, she added.

In addition to VOD and enhanced TV, the extra bandwidth allotted to digital will allow the MSO to expand its international channels. Dolan said Cablevision could add up to five new foreign-language channels. It also plans 25 more multiplex feeds, she added.

Still seeking consumer feedback on the remote control, Cablevision is trying to determine whether the VOD buttons should be placed at the top of the handheld remote. Subscribers who buy an optional computer keyboard can skip a few steps in the menu process.

The company is also working on a possible remote control design that would fit a keyboard into the fold of a clamshell-shaped device, Dolan said.

While electronic-mail usage through the digital set-top boxes is higher than expected, it's still relatively low. Executives expect e-mail usage to climb once the company starts actively promoting it, and after digital cable penetrates beyond the early adopter stage and the MSO adds new features such as instant messaging.

Consumers could use IM on the TV screen to communicate with family members in other rooms of the house, Dolan suggested.

Cablevision and Sony may want to switch out some of the current digital boxes as high-definition television takes off. Today, the Sony box can pass an HD signal through its IEEE 1394 connector to a similarly equipped digital television set, but it does not incorporate HD programming onto its on-screen menus, Hildenbrand said.

The companies are working on new HD-ready boxes that would incorporate copy protection and integrate HD programming onto the onscreen guide.

First-generation Sony digital cable boxes also do not incorporate digital video recorders. Instead, Cablevision is looking at head-end-based DVRs, Hildenbrand said.

By the end of 2002, 2 million Cablevision homes should be passed for digital, he said, and almost all the company's system rebuilds should be complete by year-end.

 

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