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Cable nets pitch wide of digital.

NEW YORK New cable networks are discovering there's danger in having a sales pitch that sounds too good.

While sales execs have to pour on the hype to convince a cable operator to give a network a slot on the subscriber-rich basic-cable tier, the underlying peril is that if the pitch sounds too good, the operator may decide to use the channel as a prime mover of a new digital tier--a tier that may reach only 10% or 15% of the system's subscriber base.

Using Noggin

One new network that found the way to avoid digital Siberia is Noggin, Nickelodeon's informational channel for kids, which last month landed basic clearances on two Comcast systems in suburban Michigan.

"Our main argument to the cable system is: Noggin will help you to be a good citizen because it's educational and commercial-free," says Noggin G.M. Tom Ascheim.

Ascheim got lucky in Michigan, but Noggin's rate card permits digital carriage when expanded basic is not available.

Carrying the load

"A cable operator who becomes convinced that a new network has real potential to succeed will want to put it on a digital tier as the driver of that tier," says Mike Egan, a former principal for Renaissance Media, a cable-system owner. A powerful network can drive up the value of a tier that might include three or four other channels that show less promise. The problem with a limited-circulation digital tier--even one with a strong network to help catapult it--is that a network that does too many digital deals with cable systems will almost by definition have no chance at chalking up a decent Nielsen rating. And minimal ratings mean, at best, nominal advertising revenues.

Lela Cocoros, AT&T's executive VP of corporate communications for broadband and Internet services, says that in their negotiations with new networks, cable operators "get involved in an elaborate chess game: They want to offer a robust analog basic service, but they also want to encourage digital tiers."

Playing along

And the new nets have to be willing to play along. In fact, all of them offer rate cards flexible enough to permit their inclusion on digital when that's the only alternative.

C.J. Kettler, president of sales and marketing for Oxygen Media, says she's telling cable operators that when the channel makes its debut on Feb. 2, 2000, it will feature tons of cross-promotion with a group of Oxygen-owned Web sites targeted to women.

"Operators will draw on Oxygen to encourage their subscribers to buy the digital set-top boxes that will eventually bring about convergence" of the TV set with the personal computer, Kettler says.

John Hendricks, chairman of Discovery Communications, has come up with a fairly straightforward plan to get his new web, Discovery Health, on expanded basic.

"Cable systems have to keep raising their rates on basic to stay profitable," Hendricks says, "so we tell them: Why not add a new network" to cushion the bad news for subscribers that the amount on their monthly bill has crept up again.

Cable operators may buy Discovery's argument about giving subscribers some compensation for the bigger bills. But these operators also expect to get paid by Discovery for handing over the beachfront property of basic cable.

Hendricks has come up with the cash, offering a fairly generous payment of $7 a subscriber for analog clearance, fueling his optimism that Discovery Health --which hangs out its shingle Aug. 2, aiming to deliver round-the-clock information about health, medicine and fitness--will shortly lock up some solid deals, although no announcements have trickled out yet.

Better be good

But Lynne Buening, VP of programming for Falcon Cable TV, a multisystem cable operator that's about to be swallowed up by Charter Communications' Paul Allen, is skeptical of Hendricks' strategy.

"When a cable system raises rates and then throws a new-network bone to its subscribers, that network had better be damn good," Buening says. "Otherwise, the customer has every right to say: I didn't ask for this network, so give me my money back."
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Title Annotation:sales pitching new networks for cable television
Article Type:Brief Article
Date:Jun 21, 1999

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