Cable channel shutdown points up industry woes; maturing industry looks to conquer new markets.

When SportsChannel struck out last week, the local cable television industry was shaken. After 10 years of almost non-stop growth for programmers and systems operators, the channel's demise was indicative of problems cablers face in a mature market, also in the midst of a poor economy.

"We have indeed been affected by the economy. Our subscription rates have fallen off as some customers can't afford cable service and have tightened their belts," said Carla Merriman, executive director for the Southern California Cable Marketing Council.

Merriman said the best growth over the next five years here will be in marketing toward blacks, Hispanics and Asians. The council began a $450,000 advertising campaign last week pursuing those untapped segments with a mixed-media strategy.

For major system operators like Continental Cablevision, the county's largest with 320,000 subscribers in L.A. and Orange counties, 1992 will be a flat year and the 1993 forecast is for 1 percent subscription growth, according to Ron Cooper, senior vice president.

Continental has operated here since 1987 and has yet to turn a profit, partially because of Los Angeles' high operating costs, Cooper said. Continental's $50 million expenditure in the South Central Los Angeles cable system is the second largest private investment in the inner city since World War II.

Revenues are covering Continental's operating expenses, but Cooper said he is reluctant to predict when there will be a bottom line profit. He said the rate of disconnects has increased because of subscriber nonpayments.

Continental has also lost subscribers because of the exodus due to the sour job market. Programming is not cable's biggest problem -- the economy is, Cooper asserted.

Cablers employ more than 6,000 in Los Angeles and $500 million is spent here just in the production end of cable programming. There are 43 operators in the LA-Orange-Ventura-Riverside-San Bernardino region, but 40 percent of the area is still uncabled, according to industry statistics.

The big question troubling cablers recently has been federal re-regulation and its impact on the cost for basic cable. Customers have been paying an average of $20 monthly in Los Angeles this year with some operators increasing fees. Operators said Congress' recent passage of the cable bill over President Bush's veto could increase their costs, which in turn will be passed along to the consumer.

The new law will allow the Federal Communications Commission to determine cable rates, customer service guidelines, picture quality and equipment standards.

While there have been a handful of cable station failures in Los Angeles such as the Z Channel, and On TV, SportChannel's shutdown announcement caught the industry by surprise. Well financed, with NBC a half owner, SportsChannel was never profitable and losses were substantial during its three-and-a-half year run, according to John Mohr, president and acting general manager of SportsChannel.

Mohr said, "This is a tough market and services are eroding. Even the well-established names like HBO are having trouble. For us it was a combination of the economy, poor team performance (Dodgers, Angels) and the proliferation of sports programming on basic cable (i.e. Prime Ticket). Ultimately, we didn't have enough subscribers."

SportsChannel will discontinue service to 67,000 subscribers Dec. 31.

Competitors estimated SportsChannel may have been losing more than $5 million a year. The cost of producing the Dodger and Angel games was in excess of $35,000 each and the station was paying the teams $100,000 per game, sources said. Some industry observers noted regular season sporting events on a pay-per-view basis may not be economically feasible here.

According to Jim Petro, president of the Southern California Cable Association and western division manager for Colony Communications, "SportsChannel was just one incident onto itself. Although the economy is struggling and the cable industry is no exception, everybody is not ready to fold and go away. Systems are all looking at various schemes of repackaging existing programming where you would take five channels and put it in a tier with a pay channel for a nominal price."

Another area for future growth is local news programming such as an all-news format in Orange County, Petro said. New niche channels such as the sci-fi and cartoon channels are other possibilities, he added.

In addition to going after ethnic viewers, the Marketing Council is using price promotions to nab new viewers. Those ordering basic cable during the campaign get a $20 credit toward their bill.

To reach ethnic consumers, the council is dropping more than a million bilingual pieces this week for Spanish and Chinese speakers. Merriman said the council hired a new advertising agency, BBDO/LA because of its Hispanica division and Asian marketing wing.