Small operators that use the HITS2Home digital platform have become increasingly frustrated over In Demand's inability to deliver pay-per-view movie product from three top Hollywood studios.
MSO executives said the lack of product from Paramount Pictures, Universal Studios and 20th Century Fox Film Corp. have put their systems at a competitive disadvantage with respect to direct-broadcast satellite companies, which can offer a full compliment of near video-on-demand movie services.
"With HITS2Home, we're only getting a partial piece of PPV," Classic Cable executive vice president of operations Ron Martin said. "What that looks like to a consumer is a multichannel-PPV service where very little product is available."
The dispute centers on licensing deals between In Demand and the studios. The studios feel that HITS2Home, which uses both a cable set-top box and a satellite dish to deliver digital services to operators with 2,000 or fewer subscribers, functions more like a DBS service rather than a cable offering, according to sources. As a result, the licensing deals In Demand has in place for the cable-targeted Headend in the Sky (HITS) service don't apply to the hybrid HITS2Home platform.
One studio executive who wished to remain anonymous said the differences between the traditional In Demand satellite deal and the HITS2Home cable/DBS hybrid must be addressed before any agreement can be reached.
In Demand senior vice president of programming and development Dan York said only that although the network wants to offer these titles to all of its affiliates, "unfortunately these studios remain unwilling to provide them under traditional terms."
The HITS2Home service allows small operators to offer subscribers a combination of the system's analog channels, plus up to 140 digital channels from the HITS pods-including In Demand's multichannel NVOD service. This allows the small systems to effectively compete with DBS services because they don't have to invest in the headend equipment required for the standard HITS service, or use any of their bandwidth.
But several operators report that the lack of product from those three studios has left gaping holes in their day-to-day PPV schedules and limited consumer choice. In October, the three studios will account for 10 of the 26 PPV movies featured, including Universal'sErin Brockovich, ($123 million at the box office).
October premieres from the three studios includeAmerican Psycho(Universal),Here on Earth(20th Century Fox), andThe Next Best Thing(Paramount).
While the HITS2Home service is only available to 1,000 Classic Cable customers at present, Martin said that figure will reach 5,000 by year-end. If the problem isn't rectified by then, Martin said, churn rates will climb as consumers become more frustrated and eventually switch to direct-broadcast satellite services.
"I'm very concerned about retention down the line," Martin said. "Consumers are confused about why they aren't getting the movie that's on the schedule.
"Our competitors have the product and we don't. Once again, it's the small markets being squeezed," he added.