Are Independents’ Days Over?

By: Shirley Brady
The message on the Ice Channel’s website says it all.
“As we begin the new year, financing prospects for the channel now appear to be bleak,” reads the Jan. 3 message from the start up network’s president and CEO, Michael Rosenberg. His plans to launch the skating oriented service Ice Channel are now on ice. “We are not completely giving up,” Rosenberg continues. “We are simply acknowledging that the time for a new, stand-alone channel which provides 24-hour/day figure skating coverage is not now.”
The Ice Channel isn’t the only would-be digital cable network to have called it quits in the past year. The trouble is that this year may be even harder for those hopefuls.
“The landscape is intensely difficult right now,” says Cathy Rasenberger, a consultant to many start-up networks. “There are still networks getting launched but in fewer and fewer categories”
Those categories include ethnic, sports, interactive games and gay-themed channels, she says. As a result, some of Rasenberger’s clients are revisiting their strategies. ”Anime’s retrenching she says of the Anime Network, a breakout hit on Comcast’s video-on-demand platform that’s still chasing a linear launch. Pridevision, a Canadian service targeting the gay community, changed owners (and its mind about the U.S Market). Better Life Television, a motivational start-up that’s doing well on AOL Broadband and on hotel SVOD, is rethinking its plans. “Their cable network strategy has been put on the back burner because it’s just too hard to get distribution right now,” she says. “You need an equity partner these days among the distributors, and there aren’t that many guys that will take an equity interest.”
It’s not all doom and gloom. A few of the start-ups on out 2004 list of diginets seeking launches have been busy getting launch commitments and signing deals. Blackbelt TV has 12 deals in hand (with three almost done), and is getting ready for a simultaneous cross-country launch as early as this summer. Also doing well on the linear distribution front in the past year are services such as Gospel Music Channel, BlueHighways TV and Bridges TV (a channel for Muslim Americans). On the VOD side, BOD VOD (a Bollywood movie programmer that Time Warner Cable and Comcast have launched) and Euro cinema (whose foreign films are now available to Charter, Insight and RCN customers) have seen action in the past year.
Going the On-Demand Route
Failed and struggling diginets place much of the blame for their troubles on Comcast, which has sharpened its focus on on-demand programming. (Programming executives contacted for this story spoke about Comcast on condition of anonymity.) Last year’s password for getting carriage on its systems was “VOD.” This year, it’s not being whispered and its certainly no secret.
Shortly after CableWORLD’s 2004 look at digital start-ups (“Attention News Nets!” June 21, 2004) was published, the operator hired former Mag Rack head Matt Strauss, a VOD veteran, as VP of VOD programming investments. His charge: to nurture Comcast CEO Brian Roberts’ favored child-VOD-and run with a wish list of proprietary VOD concepts from then-EVP of programming investments Amy Banse, who now oversees content development.
Strauss was given carte blanche, if not unlimited funds, to create a new business for Comcast, while cutting down its reliance on outside programmers for on-demand content. That has led to Select on Demand– a virtual shopping mall of VOD content. A year into the job, Strauss launched 16 VOD “channels,” ranging from Dating on Demand, a virtual video matchmaker, to more utilitarian content that lends itself to on-demand’s pause/fast-forward/rewind anytime availability, such as exercise, home repairs and step-by-step recipes.
VOD’s Go-To Guy
In his role, Strauss has become the face of Comcast’s aggressive VOD strategy. Start-ups have to go through him, especially if their programming strategy doesn’t fit into Comcast’s criteria for a linear launch.
“[One] big challenge for a start-up is that not very many have a big library yet of programming.” Strauss says. “What I’ve tried to do, if you follow this notion of branded destinations is to create places on demand where these new start-ups could live.”
He points to the example of Wheels and Wings, a Mag Rack-like category that offers some programming from a start-up network, Wheels TV.
He’s optimistic that more start-up digital networks will embrace what’s he’s doing, and not fear that their ideas will be replicated with the acquisition of off-the-shelf evergreen video. Strauss dismisses concerns that participation in Select on Demand is a dead end. With the advent of all-digital and cross-platform availability of content, Comcast’s own linear video business is evolving. “There’s nothing that ever really precludes an on-demand service from evolving into a linear channel,” he says. “If you look at the bigger picture, at some point it’s all just going to merge anyway.”
Open Minds on VOD?
One of Strauss’ first virtual channel launches, Anime Selects, gave start-ups cause for worry: The channel mimics what the Anime Network was already delivering on VOD to Comcast’s digital subscribers.
“If you go into Comcast with your channel, you’ve got to be really careful that chances are quite, probably, they’re going to turn around after your meeting and do you on VOD themselves,” says one digital network adviser (not Rasenberger), who declined to be named for fear of repercussions. “It’s tough because start-ups insist you take them into Comcast first. For there small guys, a piece of paper from Comcast is something they can take to a bank and go get funding.”
Strauss defends the Anime Selects launch. “Our objective is not to shut people out of the opportunity, but actually to empower programmers to take advantage of this crossroad in time and give them the best change of success.”
Programmers that stand the best chance of getting their own branded destination are those who embrace VOD first, he says. “The economics of launching and creating a linear channel today are more challenged than at any other time,” he says. “For a significantly lower investment you have this opportunity today to reach millions of digital subscribers on a platform that’s [growing].”
His biggest challenge in launching the Select on Demand virtual channels has been finding start-up programmers with an open mind about VOD. “My challenge initially was finding programmers who were really focused in developing for on demand,” he says. “Historically, most programmers had been focusing on linear distribution. And we’re now starting to see more programmers really recognize the huge opportunity with on demand, and that really is the future. The risk and the exposure on both sides is significantly lower.”
Diginet Props
Last month, Select on Demand launched its first branded start-up–an on-demand-only channel called Alpha Mom TV, which appears pleased with its Comcast relationship. “We reached out to Comcast and they’ve been extremely receptive and responsive,” says Alpha Mom co-founder Vicky Germaise. “As we get to know one another better, we’ll be cooking up some interesting things in all of their local markets and they seem very open to that.”
Another enthusiastic on-demand-only network is Concert, which was one of the first independent brands to launch on Comcast VOD nearly two years ago. “Comcast has seen an opportunity to aggregate and license content to promote their on-demand platform, which makes sense,” says Concert president Michael Shimbo.
Strauss knows the cable industry is watching closely as Comcast launches its unique on-demand channels. He plans to monitor usage data and consumer feedback to figure out which programming is popular. And he pledges to work with diginets to develop the platform. “We’re not necessarily looking to do it all ourselves.” he says. “We’re looking to partner with other creative producers and packagers of programming to give them the opportunity to create some interesting and unique programming for this new platform.
Comcast’s Select on Demand idea has intrigued other operators– not all of whom can boast such a massive corporate commitment on VOD. Strauss is looking for ways to add Select On Demand’s content to other MSOs’ on demand platforms. A lot of these early categories aren’t carved in stone, but are ways of testing what kinds of original content viewers are eager to access on VOD, he says. One early category on etiquette and manners, for example, no longer is available while more recognizable brand names (Charlie Rose, This Old House, Body by Jake) are being added to its lineup.
“A lot of out enthusiasm about on demand, and about programming for on demand, isn’t so much that there’s bandwidth that constraints on launching more linear channels,” says Strauss. “It’s because we actually know and believe that on demand’s a better viewing experience and platform for new forms of content.”