New York-In an unusual distribution strategy, Scripps Networks will seek analog carriage for its new luxury-lifestyle network, Fine Living, in select affluent markets, but it will take digital berths in other DMAs, officials said last week.
The company is also looking for partners for Fine Living-potentially MSOs as equity participants and upscale magazines and online companies for content-according to Ken Lowe, president of E.W. Scripps Co., parent of Scripps Networks.
Fine Living will be "a hybrid" of analog, digital and direct-broadcast satellite distribution, according to Scripps officials.
But skeptics predicted last week that Scripps would have a tough time and little luck getting analog space for its new network, as its programming will cover ground already treaded by services such as Style, Travel Channel, Speedvision and even its own channels, Home & Garden Television and Food Network.
Fine Living, which will be Scripps' fourth cable network, is aimed at upscale viewers. It is slated to launch in the second half of next year, and will have an online component, as well, company officials told Wall Street analysts during a panel at last week's Gannett Mid-Year Media Review in Manhattan, where Scripps formally unveiled plans for its latest cable venture.
The 24-hour network is the first programming service to come out of Scripps Networks' fledgling unit, the New Ventures Group, which is headed by Susan Packard. Fine Living will join not only HGTV and Food in the Scripps cable stable, but also the digital service Do It Yourself.
"This type of programming is what we do best: targeting personal interests and passions," Packard told analysts.
Fine Living's programming will cover five categories: "The Good Life," or fine dining and entertaining; personal transportation and technology, including luxury cars and yachts; homes and real estate; exotic travel; and personal finance.
The new network will try to capitalize on the fact that "there's an incredible amount of disposable income, but little time to enjoy it," Packard said. "This group of people spends money to buy time."
There is a $236 billion luxury-consumer market in this country, according to research cited by Packard.
Fine Living's target audience is made up of households with average annual incomes of $90,000 to $96,000 and net worth of $300,000 and above. But Packard said the network also hopes to lure viewers who merely "aspire" to that lifestyle.
During his remarks, Lowe, the future successor to retiring E.W. Scripps CEO William Burleigh, kept emphasizing the importance of retransmission consent for E.W. Scripps' TV stations as being a powerful asset.
The company has stations-typically ABC Inc. affiliates-in markets such as Detroit, Cincinnati and Cleveland.
Lowe noted that during the war between Time Warner Cable and The Walt Disney Co., observers at first thought that the power of retransmission consent was "weakening." But he added, "If anything, it's picked up steam."
He said Scripps had recently used retransmission consent to launch DYI, reportedly to get the service on DirecTV Inc.'s "Family Pack" tier. Scripps also used retransmission consent in the past, along with cash launch fees, to jump-start HGTV.
However, according to Packard, Scripps won't use its retransmission-consent bargaining chip to get Fine Living launched, because the latest round of those negotiations has already concluded.
Without that leverage, industry observers don't see Fine Living securing much analog space.
One top-10 cable operator said his MSO hadn't been pitched Fine Living yet. But he added: "The question we'll have for them is that they've already got DIY and HGTV. Couldn't they have fit this into those two channels? What's going to be different?"
In this difficult environment, even Oxygen-which launched earlier this year and positioned itself as an analog service-is now loosening up on the issue of digital distribution and has reduced its license fees, according to several cable-industry sources.
But Oxygen chief operating officer Lisa Hall denied that the network had changed its position on analog and digital carriage. The network's affiliation deals to date-commitments for 30 million subscribers-call for "predominantly analog" carriage, Hall said, adding that so far, Oxygen hasn't had any digital launches.
She also denied that Oxygen had cut its license fees. "We have not changed our rate card since Day One," Hall said.
Scripps has come up with a "matrix" of factors to define the affluent DMAs it hopes to gain analog carriage in. Those markets include Aspen, Colo., and a larger number of Southeast cities, according to Packard.
AT & T Broadband owns the cable system in Aspen. An MSO spokeswoman said there have been initial talks with Scripps about carriage for Fine Living.
Packard declined to comment on whether Scripps would pay upfront cash launch fees for Fine Living. But observers said the programmer might have to in this channel-locked environment, or give operators free carriage for Fine Living or a break on HGTV's rates.
"You have got to have an incentive," one industry insider said.
Packard said Fine Living's rate card would be similar to HGTV's-in the neighborhood of 8 cents per month, per subscriber.
Some cable programmers were surprised that Scripps would launch a new network when it is still jockeying to get distribution for its digital DIY.
Lowe said DIY has some new carriage deals with major MSOs that have been signed and will be announced shortly. DIY has been talking with Headend in the Sky about being added to its transponder 5, according to sources.
The original programming for Fine Living will be more expensive to produce than that for HGTV and Food, but Scripps hopes to forge partnerships with upscale magazines in order to create content for the cable network, according to Lowe.
Roughly 20 percent of Fine Living's programming will probably come from the libraries of HGTV and Food, with the rest original or acquired internationally, Packard said.
Scripps is considering taking on equity partners, including MSOs, for Fine Living-a route the company has typically eschewed, even though cable operators have sought it in exchange for launching a network.
"Ordinarily, we like to own 100 percent of everything, and Susan has the battle scars to reflect it," Lowe said. "But we're looking for the participation of equity partners only if they will give us a significant ramp-up [launch of Fine Living]."
Scripps will launch and operate Fine Living with the help of the company's partner in several of its international ventures, Alliance Atlantis Communications Inc.
The company also has a few other cable networks in the works. Scripps has toyed with the idea of launching an auto-oriented cable network, sources said.
Scripps believes Fine Living will be appealing to advertisers. Packard pointed out that the company could leverage existing relationships with advertisers on HGTV and Food to help Fine Living. She added that Scripps had great success in luring print advertisers to television with both HGTV and Food.
Fine Living's Web site is envisioned as an "online concierge" that could have strong stand-alone appeal, according to officials.
Scripps' "category media," or cable networks, generated $229 million in revenue last year, versus $149 million in 1998. First-quarter revenue this year was $73 million compared with $48 million during the year-ago period.
This year, E.W. Scripps projects that its cable networks will generate 18 percent of the company's consolidated revenue.
