Ovation Using N.Y. as Launching Pad

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New York, New York: If you can make it there, you can make
it anywhere. No one believes in that old saying more than Ovation - The Arts Network,
which came from nowhere to briefly grab a share of the limelight last year, when Time
Warner Cable of New York City announced that it was adding the newcomer to its lineup.

Although the network has fallen out of the spotlight since
then, its momentum from that moment has kept it inching forward. It remains to be seen,
however, how far this highbrow and relatively narrow niche network can go.

Ovation president and CEO Harold Morse said the network,
which launched in April 1996, expects to be in 7 million homes by year's end and in 12
million to 14 million by its third anniversary.

It runs 20 hours per day on Galaxy 7, transponder No. 13,
channel 242. The network is also on a pod geared toward urban audiences on
Tele-Communications Inc.'s Headend in the Sky digital platform, as well as on Time
Warner's "Athena" digital platform.

"We're definitely moving along," Morse said.
"We're right on schedule."

Morse said 35 percent of Ovation's access right now is
through analog, and the rest is digital.

"We put a real emphasis early on analog," he
said, getting in a few key markets -- Manhattan; Fairfax County, Va., outside of
Washington, D.C.; and part of Los Angeles -- that fit the network's upscale demographic.

And Morse remained optimistic that the network will be able
to maintain that ratio as it expands.

"We're looking good for some future analog
launches," he said, proclaiming that he expects the analog/digital/satellite universe
to reach 100 million households within four years, and Ovation to be in 40 percent to 50
percent of those homes.

PLENTY OF SKEPTICISM

But one cable operator whose company has been pitched by
Ovation said that while the network's original programming and upscale audiences might
play well in a digital environment -- particularly in affluent urban and suburban
communities -- the network is too narrow to ever gain significant analog allocation.

Larry Gerbrandt, senior analyst and vice president at Paul
Kagan Associates Inc., went one step further, saying that no newcomer is going to get
analog distribution: "As digital must-carry takes up more bandwidth, that will be the
death knell for analog carriage." Anyone counting on analog as part of a business
plan needs "a reality check," Gerbrandt insisted.

The broadcast networks air almost no performing and
visual-arts programming, and even networks like PBS, Bravo and A&E Network (deemed
more "E" than "A" these days) devote only a minuscule amount of time
to these genres. According to one 1997 survey (BY WHOM), Ovation did far better,
giving 16 percent of its schedule to the visual arts, balanced with 21 percent for music,
12 percent for drama and 11 percent for dance.

This year's lineup includes programs like Fiona Shaw's
one-woman performance of T.S. Eliot's The Wasteland, a profile of J.R.R. Tolkien
and A Tribute to Gershwin. For a production called Monet and the Mediterranean,
which was tied to an exhibit at the Brooklyn Museum of Art, the show journeyed to France
to capture the flavor of Monet's experiences.

BRINGING ARTS

PROGRAMS ALIVE

That, said Susan Wittenberg, Ovation's vice president of
programming, is the key to bringing visual-arts programming alive. Wittenberg said the
network is doing more original programming (many are co-productions) and using fewer
acquisitions. Within five years, she expects to have a 50-50 ratio.

"We need to do things that reflect our vision,"
she said.

That also includes program packaging, interstitial
programming and even on-screen personalities that give the network a distinctive look and
feel. One main reason why is because those little touches can help to "dispel the
myth that the network is all highbrow and earnest, and not fun," Wittenberg added.

Additionally, Ovation's definition of the arts includes an
Eric Clapton concert and a program on Paul McCartney. Although Wittenberg knows that she
can't and shouldn't compete with VH1 or MTV: Music Television, she wants to maintain a
balance while keeping Ovation's identity clear.

Overall, it is clear that Ovation is targeting a niche that
remains unfilled, and one that its studies show attracts mostly highly educated adults,
between the ages of 25 and 64 (55 percent female), with a median age of 39, a median
income of $52,748 and 76 percent earning more than $50,000.

But while the network cited some unusually impressive
statistics in its favor, some of those numbers were so inspiring that they seemed almost
fantastical.

For instance, Ovation claimed, "Of the 72 million
adults who support or participate in the arts and are cable subscribers, 87 percent, or 63
million adults, said they would watch Ovation on a regular basis, and 49 percent of all
adults said they would be likely to view Ovation regularly."

This boast implied either that people use the word
"regular" far too loosely, or that this narrow niche network will somehow amass
ratings that will put all of its cable brethren to shame.

NEW YORK STORY

That seems unlikely, but those figures may help to explain
how Ovation worked its way onto New York's cable system.

When Time Warner announced its lineup of new networks for
its "MetroChoice" tier, Ovation was deemed one of the biggest surprises. While
executives at Time Warner New York repeatedly insisted that they selected Ovation only on
the basis of programming content and consumer surveys, many insiders attributed its
selection not so much to the network's content as to other factors:

• Time Warner owns a small piece of the network;

The New York Times owns a larger share, and
it gave discounted rates to Ovation for full-page ads (other investors include J.P. Morgan
& Co., the Howard Heinz Endowment and Agnes Gund, president of the Museum of Modern
Art); and

• The network's board includes high-profile
heavyweights like Brooke Astor, David Rockefeller Jr., I.M. Pei and Henry Kissinger.
(Ovation chairman J. Carter Brown also reportedly talked up the network with his good
friend, Time Warner Inc. chairman Gerald Levin.)

In fact, the New York Daily News said Ovation
"shouldn't have made the cut," and that it is "so laughably inferior to
Sundance Channel, and so much less entertaining and watchable, that it has no purpose on
the roster."

Still, it may seem unfair to compare a movie channel to one
showing opera and fine arts, and Ovation's highbrow programming menu seemed particularly
well-suited to a Manhattan audience.

And Morse -- who said, "We ran a very successful
campaign" -- declared, "There is no way Time Warner [Inc.] would dictate to Time
Warner New York that the local system had to take Ovation. We had to show a groundswell.
We had over 65,000 postcards mailed in."

He added that while Ovation is "approached pretty
often by other investors," and it is always re-evaluating, for now, he prefers being
quasi-independent to being owned largely by a Time Warner or TCI.

"It makes us a much stronger network, because the
emphasis is on the product," he said.

Regardless, the network did succeed, and that sent a signal
to the rest of the country.

"Just ask [News Corp. chairman] Rupert Murdoch how
important Manhattan is for a cable network," quipped Gerbrandt, referring to the
media titan's legendary battle to gain access for his Fox News Channel. "You're not
considered a contender until you're on in Manhattan."

"Our presence in Manhattan helps to create a buzz in
the cable industry, in the

advertising community and in the arts community,"
Morse said. "It gave us quite a sense of momentum."

Still, in this competitive environment, Gerbrandt said, all
cable operators want to know is: "How much are you going to give me?" And while
there are plenty of negotiables, "it all starts with dollar signs."

Morse said the network has considered free carriage for
some charter deals, but he maintained that Ovation "is strong on upfront fees"
in most negotiations.

And while "nothing is more valuable than money,"
he said, cable operators have found "significant value" not only in the
network's programming, but also in local promotional opportunities. Morse pointed to a
recent event to help launch Ovation on TCI in Seattle and Tacoma, Wash., which brought out
many of Washington state's heavy hitters in the arts and political arenas.

Ultimately, in the right communities, Ovation clearly has
something that cable operators want.

"Our residents find a great value in cultural
programming," said Dave Hough, operations manager for Time Warner in South Pasadena,
Calif. "Ovation is a wonderful enhancement to our system."

And with endorsements like that, Morse said, "We're
singing a happy song."

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