Peacock Sports VOD, HD Feathers

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NBC has a long history in the cable business, dating back to the late 1980s when NBC President Robert Wright led the charge to rewire the broadcast company into a cross-media player with CNBC, MSNBC and other program investments.

Now, as the cable industry is launching video-on-demand and HDTV, NBC is exploring how its content fits with the new technology.

Its most high-profile activity to date is the launch of network and local news programming on Comcast Cable's VOD service in Philadelphia. It was the first market in the country where network news programs —NBC Nightly News With Tom Brokaw, Dateline, Meet the Press
and nightly local news from the NBC affiliate — are available on a VOD basis immediately after they air on broadcast TV, complete with commercials.

Bravo to Olympics

In July, NBC will launch a Bravo HDTV service, where more than 50% of the content will be broadcast in HDTV. The Bravo HDTV lineup will be led by NBC's critically acclaimed West Wing, and include other arts and cultural programs.

The icing on the cake will likely come next summer, because NBC is working on plans to carry some portion of the summer Olympics from Greece in HD. NBC will carry Olympics programming on the NBC network feed and several of its cable channels, and is determining how much HD content will appear on the network TV and cable side.

"There is a huge amount of demand coming from all the distributors for us to offer the Olympics from Greece in 2002 in HD," said David M. Zaslav, president of NBC Cable. "The extent to which we offer HD has a lot to do with the economics. But the Olympics in HD would be stunning."

NBC Cable's first taste with HDTV will come with Bravo in July. "We'll have West Wing
in HD and a significant amount of Bravo content in HD," Zaslav said. "Performing arts and concerts seem to have a lot of appeal in HD. We are acquiring a fair amount of content to help enhance the Bravo HD offering."

The downside is HD costs. "The costs are significant," Zaslav said. "The incremental cost of doing the Olympics in HD is dramatic."

At the same time, he said, "The quality and viewer experience could be really dramatic. The industry is looking to showcase HDTV and this could be a real push." And HD equipment and production costs will come down over time, which will help the economics. "The hurdle is the ability to cover the initial startup costs," Zaslav said.

But those economics for programmers underlying VOD and HDTV are central to NBC's thinking these days. In Philadelphia, NBC is offering its VOD programming at no charge on Comcast's free on-demand service. But Zaslav makes clear that, at some point, content providers need to be compensated. "The path has to be driven by economics that work for both partners."

Philadelphia VOD

"We have always been interested in understanding new technologies," Zaslav said, pointing to NBC's early investment in TiVo. Senior Comcast executives, including president Steve Burke, approached NBC early on about gaining news content for its VOD launch in Philadelphia.

"We had a couple discussions and we agreed we had a different approach," said Zaslav. "We felt strongly we should be compensated for the content. Steve felt differently. But we thought it would be useful to both of us to carve out some amount of programming as a test. We have a chance to work closely with Comcast, and it's a good window into how VOD is used in the home. It will help us understand how to price it."

Comcast officials gush about usage of its free on-demand tier, which includes news, believing programmers will be able to generate revenue eventually from ad sales. "News is a great category," said Andy Addis, vice president, video marketing, Comcast. "It's very popular."

Comcast's northern New Jersey system has rolled about 1,100 hours of VOD, akin to Philadelphia, with NBC News content and local news from WNBC-TV New York. The MSO plans aggressive VOD launches in other markets. Zaslav said discussions continue with Comcast and other MSOs about whether NBC news programs, national or local, would be rolled out to other markets.

As far as other NBC TV network content appearing on VOD, like Fox's 24, Zaslav said discussions are ongoing. "We have internal discussions," poring over lists of entertainment programs NBC owns or co-owns, he said. "The 24
model is interesting but it's not pervasive," he added.

"The issue is how much do you charge and what are the splits," Zaslav said. Another question is does carrying 24
on VOD hurt its ability to draw strong prices in the syndication market?

A place in the tier

"The way VOD is priced, we're still at a very experimental stage," he continued. "It's going to take two to three years to shake out. We'll continue to see one-off testing. We're thinking about it with some programs that we own, but we'll do it slowly."

The same economics face NBC on the HD front. But many operators appear willing to carve out a $9.95 tier for basic-cable HD content and that's where NBC's Bravo HD discussions are headed. "We're talking to almost all the distributors about getting in the $9.95 tier," Zaslav said.

That includes the Olympics discussions. "How do we offer the Olympics in HDTV? How do we create the right package with the distributors? We're trying to figure that out now."

"We need to build that path where all of us can find a comfort zone," in dealing with new technologies and services, Zaslav said.

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