CableUSA Pitches a National Interconnect


CableUSA Inc., a Raleigh, N.C.-based independent marketing
firm, is making the rounds of cable networks and potential investors, pitching a
nationwide cable ad-sales interconnect.

In discussing his "Network Distribution
Services/Network Market Spot" plan for a national interconnect delivering a select
number of cable networks to operators in the top 30 DMAs, CableUSA president Robert
Blocher declined to name the eight so-called preferred networks that were sent the
proposal. But he added that he was "confident the networks will agree once we have
the capital in place."

He also would not identify the possible investors.

Sales executives at Discovery Networks U.S. declined
comment last week, saying they had not yet been pitched on the national-interconnect
concept. Others at ESPN and Turner Broadcasting Sales Inc. were unwilling or unavailable
at press time to comment on Blocher's proposal.

On the MSO end, MediaOne Group Inc. vice president of ad
sales Ed Dunbar said he had not been contacted about such a venture. He cautioned that
such a complex plan would require considerable study, since "the devil is in the

Executives at several other MSOs and at spot-cable rep firm
National Cable Communications were mum on the NDS proposal, which they had not yet seen.

According to Blocher's proposal, NDS would be able to
"deliver all [30] markets simultaneously … to fulfill the stated objective of
the national interconnect [unwired network] that major MSOs announced [in May 1998] and
quickly denied after network objections."

Last February, NCC president John Sawhill and Jerry
Machovina, then Tele-Communications Inc.'s executive vice president, denied that there was
a national ad-sales interconnect in the works despite reports that at least five major
MSOs had approved the idea.

At that time, Sawhill said, "There's not any plan for
a national interconnect that I've heard talked about by MSOs or others." Machovina
said speculation about that concept was "a nomenclature mistake."

As a multimarket interconnect with networks that would be
downlinked to cable headends within the top 30 DMAs, NDS would "complement, not
compete with, individual market interconnects," the proposal maintained. Officials at
several major-market interconnects were unreachable at press time.

The idea is to position NDS as a way for cable networks to
garner a share of spot-television budgets, which CableUSA estimated at $8.5 billion in the
top 30 markets.

In the proposal, Blocher projected that "a first-year
sell-through of 75 percent at projected spot rates would deliver $1.6 billion in gross
revenue. A second-year sell-through of 87.5 percent would deliver $1.9 billion."

The proposal calls for the participating networks and cable
operators within the top 30 markets to dedicate one commercial minute per hour to NDS for
the first two years, with an additional 30-second unit to be added in year three.

"Under agreements with NDS client networks," the
proposal said, "all distributors [including direct-broadcast satellite, when
feasible] and each network will dedicate avail inventory … and share equitably in ad

But Blocher said he has not yet contacted MSOs or NCC about
his network-driven plan. His first priorities are pitching the networks and talking with
"organizations and independent investors" about taking equity stakes in the
venture, he noted.

Although he said, "NCC could [eventually] be the major
rep for this product," he added that he has not yet sent the rep firm a copy of the

According to Blocher, companies that have contributed
technology-planning support regarding such aspects as digital-into-digital ad insertion
included AT&T Corp., Loral Space & Communications Ltd., PanAmSat Corp., Motorola
Inc.'s General Instrument Corp. unit, Scientific-Atlanta Inc. and SeaChange International

Cable-operator investment at the headends should be
"very reasonable," he noted.

NDS, envisioned as a separate business entity, would be
"responsible for all aspects of transaction service from inventory management …
and trafficking … [to] revenue management and distribution." The exception would
be "network-specific marketing and sales efforts."

But network agreements would have to be in place
"before investment commitments to the full-scale development of the NDS entity …
will be exercised," the proposal emphasized.