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Retail Business Model Still in Planning Stages

6/20/1999 8:00 PM Eastern

Chicago -- Cable operators looking at new distribution channels for cable modems and
digital set-top boxes should be willing to experiment with their retail partners, panelists said at a National Show seminar here last Monday.

At national consumer-electronics retailer Circuit City
Stores Inc., "We're absolutely convinced that high-speed data is a product with huge
consumer demand," vice president of merchandising Rick Souder said.

Souder asked cable operators to "keep an open
mind" when working with retailers to find business arrangements that benefit both
sides.

For stores like Circuit City to sell cable modems, Souder
said, "We have to be able to justify taking our efforts off selling something that's
already proven profitable and moving to something new."

He added that retailers like to focus on new product
categories "because that's what generates excitement."

MediaOne Group Inc. began retail trials with Circuit City
in 17 Boston-area stores last year, following research from the MSO indicating that
consumers wanted more control over how and where they buy cable products, MediaOne vice
president of sales and distribution Dan Hillen said.

The partners recently added Richmond, Va., to their deal.

The MSO chose to partner with a top retailer rather than
developing its own chain of stores, Hillen said, partly for timing reasons. He added that
consumers responded more strongly to the Circuit City brand than to the MediaOne name.

Selling through the retail channel poses new challenges, as
well as opportunities, panelists said.

DirecTV Inc. executive vice president Larry Chapman said
multichannel-video programming and hardware can be a very complex sale. But at retail,
operators don't have the chance to get into all of the subtleties of programming packages
the way they can through in-the-home sales pitches.

Souder said MSOs have a strong financial incentive to move
to retail. "In an analog environment, products had much longer life cycles than they
do in a digital environment," he added. Cable operators accustomed to amortizing
hardware over seven years are now faced with boxes that could be obsolete in two years, he
added.

"There's a strong financial incentive to let the
consumer make the investment," Souder said, adding that the retailer has seen through
its experience with DirecTV that consumers are willing to do so.

 

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