Ops See Red Over New HITS Tier

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Headend in the Sky, Tele-Communications Inc.'s
digital-video service, is revamping its program lineup again, which has some of its
affiliates up in arms.

HITS sent out a memo last week informing its affiliates of
the changes, which are effective April 29.

Many of the switches involve HITS transponder 1, which
contains basic networks and which is one of the three transponders that make up the
so-called digital three-pack that TCI is rolling out across the country. Many non-TCI
systems also carry pod 1.

HITS will be replacing MuchMusic USA and Discovery Home
& Leisure on pod 1 with The Golf Channel and TV Land, according to the Feb. 17 memo.

Home & Leisure is moving to pod 11, where there are
three other Discovery "digi-nets." MuchMusic doesn't have a new berth on
HITS yet. Golf is moving up from pod 11, while TV Land is new to HITS.

Several HITS affiliates were complaining because they have
already rolled out their digital-video services using the HITS platform, and they will now
have to explain to subscribers why the lineup is changing and why they will be losing some
networks.

"We are very concerned about it," said Patty
McCaskill, vice president of programming at Charter Communications. "Anytime you
introduce programming to customers and then take it away, they are not going to blame
HITS: They are going to blame Charter."

A TCI spokeswoman maintained that the HITS changes will
help most of its affiliates.

"The vast majority of our digital customers will
benefit from the addition of The Golf Channel and TV Land on pod 1," she said, adding
that they are two of the most requested networks.

In the HITS memo, director of marketing Christine Burnham
said, "These changes strengthen HITS 1, as well as strategically placing Discovery
Home & Leisure on HITS 11 along with three other Discovery Digital Networks.
Alternative carriage arrangements are currently being explored for MuchMusic."

McCaskill said Charter has voiced its concerns to HITS
about the changes and, in light of them, it will evaluate whether HITS "is the right
solution for our systems." Charter has launched digital, via HITS, at three systems
so far. It plans to launch digital in at least another one-dozen systems, she added.

In Charter's case, its digital-video customers will be
losing MuchMusic and Home & Leisure, she said, adding that her systems already carry
Golf and TV Land on analog.

For smaller and midsized cable systems, the whole point of
taking HITS is that it permits them to add basic channels and to expand their analog
lineups without making the pricey investment of upgrading their plants. That why many
non-TCI operators -- along with TCI systems -- pull down HITS pod 1, with its basic
channels.

McCaskill added that Charter's marketing materials for
digital have now been rendered useless, and they will have to be redone -- a costly
proposition.

One programmer said the problem is that HITS is
"TCI-centric," or aimed at nonupgraded systems that don't carry many of the
services, such as TV Land, that other operators already have on analog. In addition, TV
Land is only being carried on HITS with "restricted distribution rights," the
memo said.

TCI has given TV Land a substantial distribution commitment
on analog in exchange for permitting the MSO to carry it via HITS as part of the
three-pack, said Peter Low, senior vice president of regional operations for affiliates
sales and marketing at MTV Networks.

TCI-affiliated MSOs will also be able to carry TV Land on
digital via HITS if they made similar distribution commitments, he added. But HITS
affiliates that aren't TCI partners won't be able to carry the network on
digital, sources said.

Nora Ryan, a MuchMusic consultant, said her network is
still negotiating with HITS to remain somewhere on its lineup.

HITS made some substantial changes to its lineup last
summer. At that time, operators expressed concern about how often they would be put in the
position of trying to explain these kinds of changes to their digital subscribers.

One of the pods that is still be developed is pod 5, the
so-called brand-extension transponder, where HITS now has Toon Disney, The Biography
Channel, History Channel International and Lifetime Movie Network. Trio will be on pod 5
as of April 29. Some of the networks that were in serious talks to land on HITS included
America's Voice and Nickelodeon's Noggin.

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