Cablevision Systems Corp. chairman Chuck Dolan took the wraps off his Voom HDTV satellite service here amid much fanfare last week, unveiling a surprisingly robust offering of original and already available HD channels — but leaving lingering questions about its funding and prospects for long-term success.
Voom, which became available nationwide last Wednesday (Oct. 15), will feature 39 HDTV channels and "40 to 50" standard-definition basic-cable staples by February, officials said.
Right now, there are 22 HD channels — 21 originals and Discovery HD Theater — but deals are in place to add other HD offerings, including channels from Playboy Entertainment, Starz Encore Group (two); Showtime (two) and The Movie Channel; and NFL Network.
The monthly price to customers starts off at about $40; the equipment charge is $750. As an introductory pitch, programming charges are being waived through January.
Sears has the exclusive on retail sales through January, but systems are also being sold on the Voom.com Web site and via a toll-free phone number.
Voom's centerpiece is the 21 newly developed HD channels, from Cablevision's Rainbow Media Holdings Inc. programming stable. They are: HD Cinema10 (a 10-channel movie multiplex); Monsters (horror movies); Epics (movies such as Lawrence of Arabia); Rush HD (extreme sports); Rave HD (music); World Sport (Spanish soccer and other sports); Ultra HD (fashion); Treasure HD (collectibles); Gallery HD (museum paintings and architecture); Animania (animation); News Bytes HD (a 24-hour news channel, to launch later); and Moov (unusual moving images, set to music).
Rainbow CEO Joshua Sapan said ideas for about 10 more original services are being discussed internally.
As for standard-definition fare, press materials listed 28 channels, includes ones from the A&E Networks, Discovery Networks U.S. and Disney stables, along with two C-SPANs, Rainbow Media services AMC, Independent Film Channel and Fuse; Fox Cable Networks Group's FX and Speed Channel; sister services E! Entertainment Television and Style; and such independents as Hallmark Channel and Game Show Network.
Deals for six MTV Networks channels were signed too late for the press kit, officials said.
Missing were such key services as ESPN, Cable News Network, Fox News Channel and Turner Network Television, though Rainbow officials said talks were ongoing and the roster of cable basics will grow. (See related story.)
Non-Rainbow HD offerings include ones from Showtime and Starz Encore; Discovery HD Theater; and a new pay-per-view service from Playboy Entertainment.
Some channels — with a mix of HD and SD programming — will be sold on $14.90 tiers called PlusPacks.
No DVR Yet
Officials also touted the newly designed program guide, which displays HD video.
Voom won't come to market with a digital video recorder box — something touted heavily by DBS leaders DirecTV Inc. and EchoStar Communications Corp., partly to blunt digital cable systems' on-demand capabilities.
Cablevision officials said they expect to have an HD-capable DVR box, possibly early next year. Wilt Hildenbrand, the MSO's executive vice president of engineering and technology, pointed out that no pay TV provider has an HD DVR yet.
"We won't be that far behind on HD PVR [personal video recording]," Hildenbrand said. "Sure, we don't have any DVR [now], but what's the point of having HD and then having to play it back in standard definition?"
Dolan, also Voom chairman, maintained the company's vagueness about how the venture will be funded.
Cablevision has already spent $500 million on the project, and has committed another $546 million after a planned spinoff to Cablevision shareholders later this year.
Dolan said the spinoff is going according to plan, but declined to give details or a more specific date.
Analysts are now saying a spinoff isn't likely to occur until early 2004.
Dolan wouldn't say how fast Voom would go through more than $1 billion, except to say it wouldn't spend that much in its first year.
A from-scratch DBS service can gobble up cash quickly, especially if Voom will have to launch additional satellites — which most analysts believe is necessary to gain enough capacity to be a competitive force.
Cablevision spent $250 million building and launching its Rainbow 1 satellite in July, and it is likely to spend the same amount on each additional satellite.
Dolan conceded satellite construction could eat up Voom's cash quickly, but said, "If we launched those new satellites it would be part of a new business plan."
He also wouldn't be pinned down on when he thinks the new service might break even or turn a profit.
"We don't know how much we're going to spend yet," Dolan told reporters. "This is a new market, people don't know what they want. But it's a wonderful opportunity to learn about it. We have all kinds of contingent business plans and assumptions."
A source familiar with Voom's business plan said it projects reaching the breakeven point at 1 million customers, although DBS ventures' breakeven points often come much later than initial projections.
"Whatever you think it is with the DBS business, it's always more," the source said.
In a September interview with Multichannel News, Dolan said that the DBS venture would have 1 million subscribers before it spent $1 billion.
While Wall Street analysts have been steadfastly against the service, Dolan compared this venture with his past successful forays into the entertainment business, like the first Manhattan cable system and Home Box Office Inc.
"If it's new, you're going to have pessimists, you're going to have skeptics," Dolan said. "I have never felt more confident about anything new than I do about this."
Dolan also dismissed criticism that the Voom service would be the third DBS service in an already crowded market. He said that Voom is, in essence, a pioneer in delivering new HDTV programming.
"We have an opportunity to be there first with the most," Dolan said.
Fulcrum Global Partners analyst Richard Greenfield speculated in a note last week Dolan might be planning a "bait and switch," using Voom to accelerate the HD programming category and selling HD content to other cable operators. Eventually, Dolan could sell the satellite and Voom programming outright, to either DirecTV or EchoStar.
"Even if only a couple of the 21 channels prove successful, the potential value could far exceed that of a third DBS service, at a much lower cost," Greenfield said.
Dolan said that selling content to other operators is not out of the question.
"That's certainly possible; we have no objection to that," Dolan told reporters. "If the cable operator has the capacity to provide 21 [HD] channels, it is very likely that we would make an affiliation arrangement with that cable operator. But we will not provide the service one channel at a time, you have to have capacity for the 21. Unfortunately, today that eliminates just about the whole cable industry."
Dolan has been apprising operators of his Voom plans for months, partly to gauge interest in buying the programming, MSO sources said.
MSO: We'll Listen
One cable executive last week said he was open to the idea. "I'm interested in HD, I believe the product is ready for primetime," Insight Communications Co. CEO Michael Willner said. "If Chuck has a business plan that makes the distribution of HD signals more readily available and easier to distribute to cable operators, I'm open to listening and welcome him to discuss it with us."
At the launch press conference, Sears officials said their chain is the third-biggest seller of HDTV sets, after Best Buy and Circuit City.
John Schlenner, Sears's divisional merchandise manager for consumer electronics, said Voom is available in about 1,600 stores in the continental U.S., with enough hardware to meet expected demand.
"They have challenged us to outsell what is available," Schlenner said. "If we did that, we'd have a banner, banner, banner Christmas year."