Q&A: FiOS TV’s Terry Denson

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With the recent announcement that Verizon is planning to add 25 HD channels to its FiOS TV lineup this July, the company will be offering some 60 HD channels. But as FiOS TV’s vice president of content and programming Terry Denson explains, that is only the beginning of the company’s expansion. While the FiOS announced plans earlier this year to have 150 HD channels by the end of 2008, Denson stresses that their goal is not to reach a specific number but to “be the clear categorical leader” in HD programming by “any measure.” An edited transcript follows:

Q: What are your plans for expanding your HD offering this year?

A: I don’t think there is a lot of strategic magic [about] what we are trying to do. We simply plan to be the leaders in HD, and we expect achieve that by the year end.

A lot has been made of actual channel counts but we don’t obsess over channel counts. We obsess over being the leader in HD and making sure that we are leaders in the category.

And, leadership in the category is more than just channels. It mean that you are serving a number of diverse demographics.

I think one of the earlier missteps -- why the early adoption of HD has been slower than expected -- was that the interesting parties -- the consumer electronics industry, the content providers and distributors -- targeted a narrow demographic.

Today, if you look at the content that is available, it is a far more diverse offering than there was a year ago. It is important not just that we have more content. It’s notable that the content is more diverse.

So leadership goes beyond channel counts. You have to have the deepest and most diverse content offering available and that is an important part of our content strategy.

But we expect to be the categorical leaders by any measure.

Q: In the past, Verizon executives have said FiOS would reach 150 HD channels by year-end. Is that still your target?

A: The important thing is that we expect to be the categorical leader. We are on our way. We haven’t arrived yet and we are still negotiating some agreements, which is why I want to shy away from mentioning specific channels. But we expect to have more than 1,000 HD VOD titles by the end of the year and in term of channels we will be the leaders by the end of year as well.

If you are satellite or cable, you have significant limits with respect to capacity. The beauty of fiber to the home is that capacity is not as much an issue for us as it is for satellite and cable provider.

Even so, channel counts are a little tricky. When DirecTV made an announcement about having capacity for 150 channels, everyone was scrambling to figure out what that means.

It doesn’t mean anything except that if there were 150 channels that DirecTV was willing to carry, then they would have the capacity to carry them. There are other issues, however, beyond capacity, to consider -- customer experience, the quality of the content, the nature of the business terms, etc. I don’t think that any distributor in the industry is going to offer HD content on unreasonable terms just so they can fill capacity.

Q: So you are saying that 150 HD channels isn’t a fixed target?

A: If 150 HD channels were a fixed target and DirecTV or Dish or Comcast offered 165, where do we sit? So, our beacon can’t be 150 channels. Our goal is categorical leadership and that is what we will achieve.

Q: Beyond the obvious categories -- movies, sports, etc. -- are there some other types of HD content that you’re particularly interested in?

A: Multicultural is one key point of acquisition for us. I think Dish has done a terrific job in the multicultural area and DirecTV has quietly has a done a great job of expanding their multicultural offering.

Because of bandwidth limitations, cable has not do as much. They are really forced to program based on the demographics of their market place. Time Warner has done very well in Southern California and Cox has done very well in Arizona targeted the Hispanic market. But other groups aren’t getting content they want.

Because of our delivery system and our content strategy, we look to program without regard to the demographics [of a particular area] to ensure the content is available for anyone.

So multicultural is important and we are talking to a number of content providers about multicultural HD content.

Q: Right now, there isn’t a lot of multicultural content available right now in HD. Do you currently offer any and if not, how soon do you hope to have some?

A: You’re right. There isn’t a lot available right now. It is very difficult right now for the niche provider, the multicultural provider to incur the cost of developing HD content and get a reasonable return on that investment in the near term.

We are hoping that our strategy will encourage the development of that content and I think that will help the whole market place. We don’t mind if others are fast followers because that will create a greater market of additional content and more diverse HD content, the kind of content that might be three or four rings outside of what people might identify as a bull's-eye for HD content.

We currently do not have multicultural content in HD but we expect to have some by the end of the year.

Q: On the competitive side, there have been a lot of claims about what various platforms are offering. Satellite has been talking about their 150 linear channels and Comcast has been emphasizing their plan to have 1,000 HD choices by year end. How difficult is it to get consumers to understand the relative merits of these competing marketing claims?

A: You nailed it. The challenge is speaking to the customer. DirecTV only said that they would have the capacity to offer 150 channels but in a short period of time, the capacity to offer 150 channel was translated by consumers and the media into the idea that they had a superior offering.

I think Comcast quickly tried to step into the space and redefine what how to quantify an HD offering and what makes the best HD offering.

I have to say their approach is far more difficult to convey but ultimately it is the right approach. As VOD becomes mainstream, consumers will be making a decision [on the value of different HD offerings] on basis of the HD linear content and the HD VOD content.

Satellite doesn’t want to engage in that sort of dialogue.

But it is a complicated message to effectively impart to a potential consumer. It is a lot easier for a consumer to say, "This provider has 150 channels and this one has 100 channels, so I’ll choose the one with 150 channels."

That’s an easier decision then the contemplative approach of choosing a provider with 100 HD channel and 500 HD programs available at any one time on demand. If you think about it, that means you have 100 linear choices and 500 on-demand choices, which adds up to 600 HD choices at any one time. So instead of choosing among 150 choices you are having to choose among 600.

It is a hard message to communicate. But ultimately there will be a time, as on-demand usage increases and it becomes a more mainstream experience, when this message will be easiest and most effective to communicate.

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