Rainbow Keeps New Services Exclusive

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New York -- Rainbow Media Holdings Inc. last week finally
unveiled the long-awaited cable-exclusive regional channels that it will distribute via
fiber in the tristate area.

While Rainbow will commit $100 million to the development
of local-information and entertainment programming for the "MSG Metro" channels,
the company has shelved for the immediate future any plans to offer ratings-rich sports
programming from its regional-sports networks.

Instead, cable subscribers will see local traffic and
weather, along with arts and educational programming, customized for the 27 different
regions of New York's DMA, said Josh Sapan, president and CEO of Rainbow -- or
"hyperlocal," as he dubbed the idea.

Targeted for an Aug. 5 start on parent company Cablevision
Systems Corp.'s tristate systems -- which reach 2.4 million subscribers in New York,
Connecticut and New Jersey -- Metro is comprised of three distinct channels: MSG Metro
Guide, MSG Traffic and Weather and MSG Learning Center.

Sapan described Metro variously as a localized blend of
newspapers and the Internet, "the next generation of local television
programming" and a "brand-new model for local TV." And Rainbow will exploit
its ownership of Madison Square Garden, Radio City Music Hall, consumer-electronics chain
Nobody Beats the Wiz and its considerable media outlets to promote the services.

Sapan said Rainbow is in talks to broaden Metro's
distribution to the other MSOs in the area. Rainbow wants to have systems clear Metro on
three channels in sequence -- for instance, following News 12 on Cablevision's
systems -- which, he conceded, will be "difficult" to accomplish.

A Cablevision spokesman said the MSO will carry the
services on channels 16, 17 and 18 in most systems throughout the DMA.

Even more difficult will be convincing the other area
systems to take the services, which will cost them $1 per subscriber for the package,
sources close to the situation said. Outside of Cablevision, Rainbow is hoping to clear
2.2 million households, most of which will come from Time Warner Cable's New York
City cluster.

Mike Luftman, vice president of corporate communications
for Time Warner, which services nearly 2 million subscribers, confirmed only that the MSO
has "had some preliminary discussions" about the channels with Rainbow.

Representatives from Comcast Corp. and MediaOne, which also
have systems in the region, could not be reached for comment at press time.

Rainbow is "talking to cable operators and other
partners" about distribution, Sapan said, although he did not specify the latter. One
category may be hotels, since Sapan felt that Metro would work well for Big Apple
tourists, as well as for residents.

One advantage for Rainbow is that the services will be
offered exclusively to operators. Under current program-access rules, operators can gain
exclusive rights to networks that are delivered terrestrially, rather than via satellite.
Networks with cable-operator ownership cannot grant exclusivity for satellite-delivered
services.

But pressure is mounting on lawmakers in Washington, D.C.,
to amend the rules so that programmers would have to sell even terrestrially distributed
networks to all video providers.

To bolster its Metro package, Rainbow has allied with New
York public-TV station WNET, which will produce the Guide's
"MetroArts/Thirteen" segment, consisting of six hours of nightly, noncommercial
programming, from 9 p.m. to 3 a.m., said WNET's president and CEO, Bill Baker.

WNET's contribution will be a mix of first-run and
repeat product, the latter to include its CityArts series.

"We didn't have the resources to do this on our
own," Baker said.

All but WNET's segments will be advertiser-supported,
Sapan said, although Baker added that the matter would be open to underwriters along the
lines of the public-TV station. The Traffic and Weather ad format will resemble that of
the Web, with the use of banners and the like, rather than spots.

Initially, the Metro channels were expected to offer some
live games from Madison Square Garden Network and Fox Sports New York. But sources close
to the situation said Rainbow was having difficulty adjusting its current carriage
agreements with the New York-area professional teams.

Sapan did say that the channels could be used as an outlet
for overflow sports product from MSGN and Fox Sports New York.

Rainbow will generate some of its local-news coverage with
the MSG MetroBus -- a 47-foot-long, full-service mobile-production facility, which will
travel the tristate area to produce live and taped segments for the channels -- said
Laurie Giddins, Rainbow's senior vice president of marketing and business
development.

Sapan and Giddins said that besides paid radio, print and
outdoor/transit advertising, there will be considerable cross-promotion to build awareness
of the new programming services. There also will be a consumer sweepstakes, offering as
prizes season passes to the Garden and Radio City, which are also owned by Rainbow.

Rainbow will call upon its sister entities "to maximum
capacity," Sapan said. Nobody Beats the Wiz represents "probably our best
opportunity," since its outlets reach 30 million shoppers per year, Sapan added.

Its first use of the Garden in promotion came after the
briefing, when the arena's electronic billboard was used to plug the Metro channels.
Radio City will also be called upon as a programming resource for Metro, Sapan said.

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