Last August Susquehanna Communications took the plunge and launched a content tier on top of its $31.95-per-month cable-modem service platform in York, Pa.
For $39.95, consumers could receive 10 major Internet content sites, courtesy of Synacor Corp. Among them: ABCNews.com, Major League Baseball's MLB.com Total Ticket, Fox Sports Video VIP, MusicNow Radio, GameBlast, American Greetings, Encyclopedia Britannica, The Sporting News, ESPN Radio and Disney Family Fun.
Six months after launch, SusCom is reporting a 20% penetration rate for the tier in the MSO's hometown system.
Even better, 60% of all new SusCom cable-modem subscribers are taking the $39.95 package at the point of "sell-in" in York.
A HOME RUN
"This is one absolute unqualified success story," said Dan Templin, SusCom's vice president of marketing. "We're doing what we do best, and that is packaging content with convenience and value."
Synacor brings more than just content. Its back-office software and billing support gives MSOs a one-stop shop for the service.
"We provide a new distribution channel for providers of applications and content," Synacor CEO Ron Frankel said.
Frankel believes these new-product bundles will provide high perceived value to subscribers and give MSOs another competitive tool against DSL providers. Synacor also does all the back-office work, Frankel said.
It's a private-label service that emphasizes the MSO's brand, as well as that of the content provider.
It handles all the provisioning of services and can define these services into bundles that can be sold as part of a single rate code, the CEO said. "It unifies and automates registration and enables users to access these services with one login."
The package requires subscribers to use the ISP's start page to access services. From there, subscribers go to the actual content player's Web site, such as MLB.com. Synacor handles all the authorization.
MAKES IT EASIER
The one-stop shopping has major appeal to SusCom because it simplifies its ability to launch the service and the ability for consumers to understand and subscriber to the tier.
"You don't need a separate password or credit card," Templin said. "It's convenient and secure because billing comes through our regular monthly statements."
SusCom has offered high-speed Internet service for several years, and has watched data competitors enter the market.
Templin believes the "speed" side of the equation is increasingly becoming more of a commodity. (SusCom's $31.95-per-month service offers speeds of 1.5 Megabytes per second downstream and 128 Kilobytes per second upstream.)
"We wanted to bring the best of the web to our subscribers. To get past the early adopter, you need to integrate the best of the web content that consumers can't experience without high speed connections," he said.
"Our strategy is to be the leading broadband service provider in our community. The more service you can provide, it gives you the best possible opportunity to gain and retain customers on all levels."
Templin is more than pleased with the results, given that he expected 20% penetration at the end of 12 months, not six. He also projected a sell-in rate of 30%, and SusCom has doubled that.
SusCom's high-speed data penetration stands at 15% of homes passed, but Templin said he's adding 0.75% penetration each month. In some markets, penetration is as high as 28%, and the content package will only help on that score.
SusCom's success also stands to alter some long-held notions in the cable business. One holds that it is dangerous to push too much video content on the high-speed platform, for fear of cannibalizing the traditional video business.
Templin isn't concerned. "We haven't found the platforms cannibalizing each other," he said. What's more, digital subscriber line providers are looking at adding more and more content to their competitive offerings, he said.
Templin also doesn't think going from 1.5 Mbps to 3 or even 5 Mbps would make that much difference to consumers. "To most consumers, they would recognize no change in their actual experience. We didn't want to go to that route."
Instead, they found Synacor.
Synacor was formed in 2001, the result of a merger between Chek.com and Mypersonal.com. It's raised more than $7 million in two funding rounds, the most recent completed last week.
ROLE OF PORTELUS
Its back-office platform, Portelus, emerged from the merger. Portelus allows Synacor to provision and deliver multiple standalone subscription services through parallel registrations to a single user ID and log-in address.
Portelus also acts a conduit between the user and multiple services processing registration, cancellation, authentication and validation requirements during every Internet session.
Portelus software handles the various digital rights management formats from each content provider. Service access is enabled through a single access point at a URL of the ISPs choosing.
Frankel signed his first content deal in 2001. In addition to what Suscom is offering, Synacor has deals with Rivals, Stats Inc., CinemaNow, Disney Blast, Music Net, IGN, GameBlast, Clever Island, Salon.com, Zero Knowledge, Snapfish, Clipart and weather.com. Frankel said MSOs can mix and match content services to their liking, with prices set according to the acquired content. Overall, Frankel pays content providers a per-subscriber, per-month fee.
In addition to the content, Synacor offers firewall, antivirus, photo and premium electronic-mail services.
Frankel, of course, is enthused about the early take rates at SusCom. "We give a $40 value for $8 incremental, and we're getting very high take up rates. The take rates look a lot like extended basic."
Frankel also said the content ecosystem is still evolving. Asked about the National Football League and National Basketball Association, he said, "Different brands have different approaches."
For MSOs, he said, "it's about increasing the size of the pie. The MSOs get to leverage off the brand of the content providers." Aside from SusCom, he said he expects other MSO deals soon.
And Templin doesn't believe cable operators will face the same evolutionary dilemma in the video world, where more channels always translated into increased rates. Because of the self-provisioning aspects of the Internet, more content can be offered to subscribers without raising basic-cable rates. Consumers can pick and choose what paid sites they wanted, or take the packages that SusCom offers.
"It's very easy to do specific services to different levels of customers. Customers can self-provision. It all can be done easily through the Portelus engine. It's a seamless integration."