The Box Ponies Up Launch Fees


Changing its financial model under its new ownership, The
Box Music Network is no longer offering cable operators a share of its transactional fees
from viewers who order videos, but it has begun extending launch fees, reportedly in the
$3- to $4-per-subscriber range.

In the past, The Box -- which is on a roll in terms of
signing distribution deals -- has given its cable affiliates a percentage of the revenue
that it received when viewers called in to request that a specific music video be aired on
the service.

But now, in new contracts with operators, MSOs won't
get a share of that money, a spokesman for The Box said.

"Our economic model has changed since TCI Music bought
us," the spokesman said. "And we do provide launch incentives."

The Box's parent, The Box Worldwide Inc., was acquired
by TCI Music in December. The network's president, Alan McGlade, couldn't be
reached for comment last week.

But through the spokesman, McGlade said that over the past
three years or so, The Box has been evolving from a music-video jukebox to a traditional
programming service. The acquisition by TCI Music helped to accelerate that evolution, the
spokesman said.

The Box now has 6 million U.S. cable subscribers, although
its recent affiliation deals will start to bump that number up. During the past few
months, the network has closed a number of affiliation deals, with commitments for several
million subscribers from major MSOs including Tele-Communications Inc., Time Warner Cable,
InterMedia Partners and Comcast Corp.

In the past few years, it was all the rage for programmers
such as Fox News Channel, Animal Planet and Home & Garden Television to pay upfront
incentives -- so-called cash launch fees -- to quickly jump-start their distribution.

This year, some programmers are still extending such
offers, including Game Show Network, Pax TV, Great American Country, Outdoor Life Network
and, now, The Box. Pax TV is reportedly paying $6 per subscriber for analog carriage,
while Outdoor Life has offered some operators $2.75.

The Box previously depended on revenue from viewer phone
requests, which averaged $1.99 per video, as its source of income. It didn't and
still doesn't charge operators license fees, but in the past, it would give them a
share of that transactional revenue.

At one point, The Box was giving operators 5 cents per
month, per subscriber, guaranteed, or 20 percent of net revenue from the videos ordered --
whichever was greater.

The Box is currently depending more on national ad revenue,
which has grown to about 55 percent of the service's revenue, versus 45 percent in
transactional fees, the network spokesman said. And The Box is also adding more locally
tailored programming and interstitials to its schedule, and not just airing videos that
viewers order.