With merger, players get serious about videogame TV.

Los Angeles videogame channel G4 has built a reputation as some of the best TV no one watches.

The channel was started in 2002 by a management team that included a former Walt Disney Co. executive, an NBC Networks vice president, an MTV veteran and Sony Computer Entertainment insiders.

Philadelphia-based Comcast Corp. backed the deal, but G4 quickly started burning through the $150 million that Comcast had allocated to the channel over five years, while drawing in too few gamers.

As of Dec. 31, 2003, the channel was only in 11.7 million homes, far below the 40 million needed to attract big advertising dollars.

Now Comcast wants to turn two money losers into one winner by purchasing San Francisco-based Tech TV for $300 million from billionaire Paul Allen's Vulcan Inc., and combining it with G4. The new channel, G4techTV, premiered last week.

"Economics are driving the acquisition and the merger," said David Joyce, an analyst with Guzman & Co. "They need to get a mass amount of viewers. You normally need at least 40 million subscribers to break even."

TechTV is bringing with it a wider distribution of 44 million cable and satellite homes, bumping the merged network above the threshold needed to tam cash flow positive. It's seen by 1.7 million cable and satellite subscribers in the Los Angeles area, plus some DirecTV subscribers.

"There will be better success for one channel," said Charles Hirschhorn, founder and chief executive of G4 and the chief executive of the combined channel. "We hope to break even by the end of next year."

High hopes

Hirschhorn came up with the idea for a game channel in 2000, after observing the rapid growth of the videogame industry while working in motion picture and television management positions at Disney. "At the time and still now it is the fastest growing form of entertainment," he said.

(The worldwide market for videogames totaled $23.2 billion in 2003, and is expected grow by another $10 billion by 2008, according to market research firm DFC Intelligence.)

He presented the idea to Comcast, then a midsize cable operator, as a vehicle to attract 12- to 34-year-old males, a sought-after demo graphic for their high levels of disposable income.

The channel, with 9,000 square feet of subleased space on Olympic Boulevard (its first formal meeting was in the chief operating officer's kitchen), debuted in 300,000 homes, broadcasting 24 hours a day and producing 13 half-hour low-budget original series on focusing on gamers' lifestyle.

In 2003, Hirschhorn and Comcast noticed that Vulcan was shopping around for a buyer for its troubled TechTV. They saw the network as a perfect opportunity to leapfrog in size.

"TechTV never made money," Hirschhorn said. "Vulcan owned it and was getting impatient with the investment. TechTV was having a tough time acquiring more viewers and holding on to distribution, so they were looking for a strategic partner."

Representatives from Vulcan refused to comment about the sale.

TechTV was launched in May 1998 and has had trouble finding an identity. When it started, it was basically a news feed for Silicon Valley, but the dot-com bust rendered it a less desirable commodity.

The network switched gears and became oriented more toward lifestyle and entertainment programming, but was still in the red. "TechTV went through a metamorphosis and became more like a sci-fi channel," Joyce said.

G4techTV, which has since moved to a different space in West Los Angeles (also on Olympic Boulevard), has offered 80 San Francisco employees from TechTV positions at the new company. The network will be shuffling around programming for the next few months, trying to determine how to fit 12 of G4's best programs with 12 of TechTV's programs.

"In the fourth quarter we'll take a big effort to market and re-launch the new channel," Hirschhorn said. "It doesn't make sense to do it on Friday because we don't know if we have the right shows on the air or on at the right time."

The network has been offering cable and satellite providers either cash or an equity interest to carry the channel. Englewood, Colo.-based EchoStar Communications Corp. chose to take the equity interest and offer the channel on its DISH Network.

"We just felt it was a good way to invest," said Marc Lumpkin, a spokesman for EchoStar. "The channel makes perfect sense in modern times when so many companies are doing things like merging cell phone technology with video technology."

Hirschhorn acknowledged viewers may not like changes to the respective channels.

"The owners of both these two channels independently came to the decision that the channels could not survive independently," he said. "Viewers will be disappointed that some shows will not be produced, but it's in our best interest to move forward and do it together."

Convergence

Comcast unit G4 purchased TechTV to form G4techTV.

Programming: A 24-hour television cable news and information channel dedicated to technology and video games

Launched: May 28

Homes Reached: 44 million

Headquarters: Los Angeles

Owner: Philadelphia-based Comcast Corp.