Even with Oprah, Oxygen Faces Tough Launch

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Even with the talent of Geraldine Laybourne, Oprah Winfrey
and Marcy Carsey behind it, the odds are stacked against a stand-alone, independent cable
network like Oxygen, according to cable-industry observers.

Last week, Winfrey's Harpo Entertainment Group and
Carsey-Werner-Mandabach struck a deal to invest in and produce programming for upcoming
women's network Oxygen.

Both companies are also committing content from their
libraries to the network when it becomes available -- fare such as Roseanne, Cybill
and Grace Under Fire.

Oxygen -- which is set to launch Jan. 1, 2000 -- will
target women with both informational and entertainment programming. As such, it could be
the first major rival to Lifetime Television.

The network -- which, to date, lacks the financial backing
of any MSOs or huge cable-programming dynasties -- will have seven hours per day of
original fare, as well as product from the two libraries, and it will deliver news, talk,
comedy, drama and sports.

So far, Oxygen, which will offer "modest" launch
fees, has inked one carriage deal, with Tele-Communications Inc. From Oxygen's debut
through the year 2002, TCI will launch the women's network in 7 million homes, both
analog and digital.

TCI's rollout -- which includes launch fees -- does
have strings attached: It hinges on Oxygen doing deals with other MSOs to secure carriage
in at least 5 million homes within a set time, according to Laybourne, who does not expect
that to be an obstacle.

"Distribution, distribution, distribution: That's
the question," said Jedd Palmer, former senior vice president of programming for
MediaOne, who has seen Oxygen's pitch. "In the past 24 months, who has been able
to bring a stand-alone network or pair of networks to market and get a liftoff?"

Unlike other programming services, Oxygen, to date, has no
MSO investor-partners to jump-start its distribution. Its other daunting challenge is that
it will be an independent network without the leverage, or infrastructure and economies of
scale, of a giant parent programmer.

As it stands now, unless a surprise partner like a major
cable programmer comes in, Oxygen will have to build an affiliate-sales force and back
office from scratch.

"The infrastructure doesn't worry me in the
slightest," Laybourne said, adding that she expects Oxygen to be in 50 million homes
in five years. "I know how organizations run; I feel good without a big
infrastructure."

And Laybourne won't have the clout -- or luxury -- of
packaging her new channel with an existing cable-network stable, the way that a Discovery
Communications Inc., MTV Networks or Turner Broadcasting System Inc. can.

Laybourne -- who made Nickelodeon a kids' TV
juggernaut before becoming president of The Walt Disney Co.'s cable unit -- said she
is up to the tough challenge of launching a new network in a channel-crunched world.

"Everything that's good and big is hard,"
said Laybourne, who left Disney earlier this year to start Oxygen Media.
"Nothing's been easy for me."

Oxygen, which is still seeking investors, also plans to
convince operators to pay a rich 20 cents to 25 cents per subscriber, per month in license
fees, according to several sources.

However, Laybourne said that rate was only 19 cents.

Still, that's a pricey rate card -- even higher than
those for popular and established services, such as A&E Network and Discovery Channel
-- those sources added. It's unclear how that rate card would fit into any launch
fees that Oxygen pays out.

While sources maintained that Oxygen is also looking to
convince systems to switch out Lifetime for it, Laybourne flatly denied that.

Pushing for analog carriage, Laybourne has already had
talks with Comcast Corp., Falcon Cable TV Corp. and Time Warner Cable, among others.

TCI president and chief operating officer Leo J. Hindery
Jr. described Oxygen as TCI's "last great analog launch." But neither he
nor Laybourne could specify yet how many of TCI's 7 million homes for Oxygen will be
analog, rather than digital. Hindery is bullish on Oxygen, predicting that it will offer
"stunning, good programming," uniquely tied to its own online sites.

"[A total of] 50 percent of my audience is
women," he said. "That category, to be frank, is dramatically underserved. There
are more channels delivered to ethnic populations than to this category."

Hindery also acknowledged that Laybourne has a tough row to
hoe with a stand-alone network.

"I know the odds, the risk," Hindery said.
"Everyone says you have to own 10 of these [networks to succeed]. People have to get
real here and help [Laybourne] out."

Laybourne -- whose other investors include America Online
Inc. and ABC Inc. -- said Oxygen will be a brand "that is an advocate for
women."

She added, "What we did for kids with Nickelodeon is
what we're going to do with this."

Laybourne said she and Carsey approached Winfrey about
being part of Oxygen.

"She has 13 years' worth of focus groups every
single day, with 700 women," Laybourne said. "She understood what we were doing
instantly."

Laybourne added that while women watch more television in a
week than men do, they watch less cable than men do.

Women's programming, however, has been a tough sell to
cable operators. In a recent Myers Research Group study, 64 percent of cable operators
said they feel that the amount of programming on cable for women is "just
right."

"There is still a prejudice against women's
programming," said AMC Networks president Kate McEnroe, whose female-targeted Romance
Classics just crossed the 20 million-subscriber mark.

But several MSO officials were upbeat about what Oxygen can
bring to the table.

"It's going to make a connection with women who
are starved for that connection," said Pam Burton, Prime Cable's director of
marketing. "Watching Oprah, you feel that she's like your girlfriend next
door."

At Charter Communications Inc., vice president of
programming Patty McCaskill said, "We certainly believe that there is room for more
programming targeted toward women. And these are three women [Laybourne, Winfrey and
Carsey] who have very strong and successful track records. That indicates that this
channel is a reality."

While acknowledging that Laybourne and her new partners
have a big challenge in launching a stand-alone network, consultant Rob Stengel said,
"It's a real uphill strategy, but they bring a lot of assets to bear on the
mission."

Oxygen has several program blocks planned. In the morning,
"The Hive" will be talk-oriented. In midday will come "Working Lunch,"
for working mothers and entrepreneurs. The late afternoon will center on teens, while an
early evening block will have comedy. Primetime will feature a movie with a host.

"This is a dynamite digital channel, but where is the
space on analog for it?" Palmer asked.

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