In a difficult environment, Rainbow Media Holdings LLC is officially pitching distributors on Voom HD Networks, salvaged from Chuck Dolan’s defunct satellite service.
Rainbow will start off by marketing a suite of 10 HDTV channels, networks that EchoStar Communications Corp. is already carrying, to cable. By the end of the first quarter next year, Voom HD will expand to 21 networks, Rainbow CEO Joshua Sapan said last week.
“We have had the beginning of conversations with distributors,” Sapan said. “This marks the more-official kickoff of some of them.”
He wouldn’t specify how big a license fee Rainbow will seek for Voom HD, which will only be offered as a full suite, with distributors required to take all its networks. “It’s of its maximum effect when it’s carried as a whole,” Sapan said.
Rainbow, which is being spun off by parent Cablevision Systems Corp., wants distributors to offer Voom HD as part of a basic HDTV basic package, not as a separate HD tier with its own price tag.
The programmer is trying to create a viable business from the remnants of Cablevision chairman Chuck Dolan’s failed Rainbow DBS direct-broadcast satellite service, which carried the Voom HD Networks.
Earlier this year Cablevision — after a huge battle between the elder Dolan and his son, Cablevision CEO James Dolan — sold its Rainbow 1 satellite to EchoStar Communications Corp. for $200 million and shut down the DBS service. The Voom HD networks were saved, though, because EchoStar received a 20% stake in the channels and agreed to offer them on its Dish Network DBS platform under a 15-year carriage deal.
Wall Street analysts had argued that Cablevision and Rainbow should have wholesaled their Voom HD Networks to cable operators and DBS providers from the get-go, rather than trying to launch their own full-fledged DBS service. By waiting, Rainbow may now have trouble getting MSOs to give up increasingly precious bandwidth for all the Voom HD Networks, some said.
'TALL ORDER’ FOR CARRIAGE
Craig Moffett, a Sanford C. Bernstein & Co. analyst, last week said it will be a “tall order” for Rainbow to get carriage for Voom HD.
“Rainbow is running right into the teeth of capacity constraints for cable MSOs,” he said. “We’re right at the front edge of wide-scale digital simulcasting that’s going to consume incremental capacity at least for the next two to three years.”
So far, Rainbow’s partner EchoStar is the only Voom HD affiliate, albeit a major one that is expanding and revamping its HDTV package to better compete with cable.
Cablevision hasn’t signed a deal for Voom HD yet, Sapan said. And last week a DirecTV Inc. spokesman said it has no interest in carrying Voom HD, since it is concentrating on launching local TV stations in HDTV.
Rainbow is positioning Voom HD as a third leg of its business, an addition to its cable networks, which include AMC and WE: Women’s Entertainment, and its video-on-demand offerings, MagRack and Sportskool.
Sapan stressed that Rainbow is creating original content ” specifically for Voom — “probably the most robust and abundant undertaking in the world of HD” — and not a simulcast or conversion of standard-definition channels, in a world where there is a dearth of HD programming for distributors.
Voom HD, with 2,000 hours of native HDTV programs and more than 1,000 movies transferred to high-definition format, has a huge HDTV post-production facility and studio in Manhattan that represents a $30 million investment by Rainbow.
THE 10 CORE NETS
The 10 core Voom HD channels are Rush HD, Rave HD, Animania HD, Monsters HD, Guy TV HD, The Majestic HD, Ultra HD, Equator HD, Gallery HD and HD News, offering movies, news, sports, fashion, arts, music, travel and animation. Rainbow maintains that this package will appeal to a broad spectrum of demographics, and will encourage HDTV channel surfing.
“We’ve come up with product that is created and made for HD,” Sapan said. “As a consequence, we think we bring a different experience to the consumer.” Not everyone is as enthusiastic.
“Cable operators are scrambling to make more capacity available for VOD,” Moffett said. “So anything other than must-have HD programming is going to be very hard to find room for, and it’s not clear that anything in the Voom roster rises to the level of must-have programming.”
Fulcrum Global Partners analyst Richard Greenfield said “the content isn’t great on these channels, but there isn’t a lot in HD at the moment.” But he added that he continues to believe “there is a dire need for more content in HD among MSOs and satellite operators. … The big issue is whether the cable operators can afford the bandwidth.”
EchoStar and DirecTV Inc. are both pumping up their HDTV offerings. EchoStar chairman Charlie Ergen recently told analysts that after the launch of his Echo 10 satellite, he will be able to offer up to 50 national HDTV channels and 20 local ones.
Currently, EchoStar is offering Voom HD for $5 a month, separate from its $9.99 basic HDTV package.
Once EchoStar debuts its new HDTV package next year, Voom HD is expected to be rolled into that offering, not sold as a separate tier as it is now, sources said. That would help boost its distribution.
An EchoStar spokesman declined to comment on how the provider will package Voom HD next year.
NO SALE TO DIRECTV
DirecTV, part owned by News Corp., is also boosting its HDTV package. To enable that, DirecTV launched one new satellite in June and will launch another one in October, according to spokesman Bob Marsocci.
It will add some national networks on its roster — including ESPN2 HD next month — but DirecTV’s focus is adding local channels, so it’s passing on Voom HD.
“We’ll be initially launching this year in 12 markets local HD and then next year continue to roll out probably at least in another few dozen markets with local HD,” Marsocci said.
Rainbow made some other Voom announcements last week. Premier Retail Networks will supply Voom HD programming to retailers — such as Wal-Mart, Sam’s Club, Best Buy, Circuit City and Costco— to air on HDTV demonstration TV sets in stores. And Monsters HD acquired exclusive rights from New Line Cinema for more than 25 films. They include six of the seven A Nightmare on Elm Street titles and a network premiere position on the 2003 remake of The Texas Chainsaw Massacre.
Voom HD also nailed down exclusive rights from Metro-Goldwyn-Mayer to premiere the HDTV version of 17 James Bond films on The Majestic HD, including Dr. No and Goldfinger.