Voom featured in WSJ - Sept. 7, 2004

digideal

SatelliteGuys Guru
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Feb 25, 2004
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Great article about Cablevision's plan to spin off Rainbow Media Enterprises to give investors the chance to buy a part of the VOOM enterprise. Watch for VOOM to be in just about every mom and pop store for the holiday season, the big box stores won't be allowed to carry VOOM if they also want to carry Dish and Direct. They are going to do a "grass roots" approach to generating in store buzz and hopefully catch fire soon...this article talks alot about the VOOM challange!


From the article: http://online.wsj.com/article/0,,heard_on_the_street,00.html

"As of the end of June, Voom had signed up only 25,000 subscribers. The service posted $81.5 million in losses in the second quarter with just $2.7 million in revenue. Even more worrisome, close to one in five subscribers that have signed up for the service have canceled it."

"Ironically, the faster Voom sells subscriptions, the quicker it runs out of cash because of the high capital costs associated with installing dishes and set-top boxes. Cablevision executives haven't broken down these costs, but analysts believe they could exceed $600 a subscriber. It also isn't clear how Rainbow would finance the launch of the additional satellites it would need to beef up its channel offerings."
 
Most of us cant get to the link because we are not subscribers to the site - can you please post the entire article for us?
 
digideal said:
"As of the end of June, Voom had signed up only 25,000 subscribers. The service posted $81.5 million in losses in the second quarter with just $2.7 million in revenue. Even more worrisome, close to one in five subscribers that have signed up for the service have canceled it."

So does "signed up" = "currently has"? If not, that means 25,000 signed up and 5,000 canceled = "currently has" 20,000. :confused:

-John
 
God I feel sorry for you guys...This is good stuff
No one has access to DJ or the Journal?


6 Sep 2004 23:00 ET WSJ(9/7) Heard On The Street: Cablevision Spinoff Risky Bet



(From THE WALL STREET JOURNAL)
By Peter Grant
CABLEVISION SYSTEMS Corp.'s plan to spin off Rainbow Media Enterprises this month gives investors the opportunity to buy into the quixotic satellite-television dream of Cablevision founder Charles Dolan.

The price of entry should be low. The betting is solidly against the success of the new satellite service for high-definition television owners, called Voom. Mr. Dolan has a great track record, having built Cablevision Systems into the country's sixth-largest cable operator with about three million subscribers in the lucrative New York City market.

But many analysts and investors feel his business plan for Voom is flawed, given the tough competition the service faces from the two established satellite TV companies, DirecTV Group Inc. and EchoStar Communications Corp.

Some institutional owners of Cablevision are expected to dump their shares of the spinoff when it occurs. "I have a hard time understanding what they're offering that will make them unique enough to build a business as the No. 3 satellite company," says Kurt Funderburg, an analyst with Harris Associates, a money-management firm based in Chicago that owns Cablevision shares.

For those with a high-risk threshold, though, Rainbow might turn out to be a decent investment -- especially if its shares can be picked up cheap. There is always the possibility that Mr. Dolan is right and most everyone else is wrong. The cable-industry pioneer has won over his skeptics on several occasions, like when he founded HBO.

Another reason to own Rainbow is that the spinoff, along with Voom, will include three of Cablevision's successful cable networks: AMC; WE: Women's Entertainment; and Independent Film Channel.

Analysts value those networks at more than $1.37 billion -- or $4 to $5 a Cablevision share. But the value of the spinoff is expected to be less than that because the satellite venture likely will eat up a good chunk of the networks' earnings, about $200 million annually before interest, taxes, depreciation and amortization.

One bullish scenario would be if Voom fails sooner rather than later. In that case, the service's existing satellite would be sold and the cash flow of the three networks would be available for dividends or more productive uses. Some investors in Rainbow "will be betting counterintuitively on the early demise of the satellite business," says Craig Moffett, a cable analyst with Sanford C. Bernstein & Co.

Mr. Moffett rates Cablevision shares as "market perform," meaning he believes the stock's performance will track the Standard & Poor's 500 index. He hasn't yet rated the Rainbow spinoff.

That may be a good bet given Voom's initial results. Cablevision launched the service's first satellite in July 2003 and began offering service late last year. As of the end of June, Voom had signed up only 25,000 subscribers. The service posted $81.5 million in losses in the second quarter with just $2.7 million in revenue. Even more worrisome, close to one in five subscribers that have signed up for the service have canceled it.

Cablevision is hoping to complete the spinoff by the end of September. But it might be delayed by an investigation by the Securities and Exchange Commission, which is looking into accounting irregularities at AMC, formerly the American Movie Classics network.

Once the spinoff is completed, Cablevision shares may rise a bit on investor relief that the cash drain is over. "The spinoff allows a pure play in the cable business," says Thomas Eagan, an analyst with Oppenheimer & Co.

Cablevision executives declined to comment on Voom, citing the fact that the Rainbow spinoff is in a quiet period with the SEC. But Mr. Dolan, Cablevision's chairman and the driving force behind the satellite venture for over 10 years, has long extolled the greater efficiency of beaming television from satellites rather than over a cable network.

When the spinoff is completed he is scheduled to step down as Cablevision chairman to become chairman of Rainbow. His son, James Dolan, now chief executive of Cablevision, will take on the chairman post as well. Another son, Thomas Dolan, will become chief executive of Rainbow.

Voom's appeal is that it offers more than 35 HDTV channels -- far more than any other cable or satellite company, as well as over 80 standard-definition channels. The service hasn't exactly caught fire yet, partly because only 10 million households have purchased HDTV sets. While that number is expected to grow rapidly, most cable operators and the established satellite services already offer the most popular networks on HDTV, like ESPN and HBO, and will likely add channels as more households get HDTV.

Voom doesn't offer local channels without setting up a special antenna and charges more than other satellite services to install at $199. Other services offer free installation but, unlike Voom, require subscribers to commit to at least a one-year contract.

Cablevision has sunk over $500 million into the satellite venture over the past decade and its stock has been weighed down by investor anxieties over how much more will be needed. All cable stocks are down this year but Cablevision's drop has been one of the biggest. Its shares on Friday were trading at $18.25 a share in 4 p.m. composite trading on the New York Stock Exchange, down 10 cents for the day and down 34% from their 52-week high of $27.70 that was reached in February.

As for Rainbow, much will depend on whether Voom can get enough traction before it runs out of cash. The spinoff will be launched with a sizable cushion, thanks to its ability to borrow against the cable networks. Last month, Rainbow obtained $950 million in funding commitments from banks and sold $800 million in junk bonds. After repaying existing debt and fees, Rainbow will be left with a war chest of about $650 million. But investor concern about Voom is reflected in Rainbow's debt covenants, which limits the satellite business to $150 million a year of the cash flow generated by the three networks.

How long will the recently raised cash last? Ironically, the faster Voom sells subscriptions, the quicker it runs out of cash because of the high capital costs associated with installing dishes and set-top boxes. Cablevision executives haven't broken down these costs, but analysts believe they could exceed $600 a subscriber. It also isn't clear how Rainbow would finance the launch of the additional satellites it would need to beef up its channel offerings.

Russell Solomon, a cable analyst at Moody's Investors Service, believes Rainbow probably will have enough cash to fund projected deficits at Voom for about two years. "We think 2006 will be an inflection point where [Rainbow] needs further financing," he says.
 
With the leased space and the lack of any other real HD channels out there, I'm just not sure why they'd need to launch any more birds. I think that concern is moot right now and for a while to come.
 
madpoet said:
With the leased space and the lack of any other real HD channels out there, I'm just not sure why they'd need to launch any more birds. I think that concern is moot right now and for a while to come.

Because you need to plan for the future(HD locals maybe,new HD channels,missing Sd channels,new SD channels),with the time involved planning new birds,build time, you are looking at two years down the road,what would happen to D* and E* if they did not keep doing this?
 
Voom's 1 in 5 canceled has to do with their no contract option, as well as inability to speedily take care of people's OTA problems, and no DVR to keep them around. They need the confidence when they release the DVR home solution that they can offer it with 1 or 2 year commitments, along with the most HD it's really a no brainer.
 
I dont get it. When Direct TV adds there 24 new HD Channels in October and then adds there new Mega Dish next summer with 50 HD Channels, all this while giving the first 6 Months of the HD Package for FREE and then

only $10.99 a month after that, how is Voom going to keep customers? Who is going to buy stock in the company or risk buying inventory to sell it?
 
Let's look at it realistically shall we?

When D* adds 24 HD channels half of them will be E/W versions of network channels, only "for those who qualify".

HAve you seen a mega-dish yet? Pray tell what 50 HD channels are there TOO add? Unless D* is buying Voom and adding their lineup I have no idea what you're talking about.

HOWEVER... if D* adds 50 HD channels for $10.99 a month on top of their regular subscription fee, and they have and HD Tivo, I'm sure Voom would be out of the game. I would definately hop over, again, I will believe that tall tale when I freaking see it.
 
What's the word on D*'s Sky DVR boxes that will be coming out? Are they planning to include any sort of home networking system like VOOM is? Honestly, having the whole-home DVR functionality is what will eventually keep me with VOOM.
 
bruce said:
Because you need to plan for the future(HD locals maybe,new HD channels,missing Sd channels,new SD channels),with the time involved planning new birds,build time, you are looking at two years down the road,what would happen to D* and E* if they did not keep doing this?

In 2 years, how many more non-local HD networks do you honestly predict? There just isn't a ton more to go HD. Voom has, with the new leased space, enough capacity to double it's current HD lineup if I read it correctly. That's without switching codecs and compressing the signal even more if they choose. WHile I agree someday they'll need a new bird, I don't think it's going to be in the next couple of years which is what this article seemed to reference.
 
voom around for how long...?

Well, now you have all read the article, I really don't know which direction Voom is headed. They are pushing hard to be included in the retail world and will be everywhere but the big box stores in a few months. The BB and CC of the world might be the answer to their success, if they can solve the OTA problem.

I could sign up 50 people tomorrow if they provided OTA feeds of some national networks in the mix...they don't want to mess with two antennas and I can't even get all my locals because of my apartment location and proximity to downtown. This is a major problem with V*! The DVR issue will resolve itself, but the OTA is even more of the issue stopping people from signing up. Add four stations and double your sub list I'd be willing to bet. Add DVR, and double that. D* and E* won't mess with voom as competition until the magical 1,000,000 mark.

Personally, I've been Vooming since March. It's great, i love it, but i'd be willing to switch if i could a) lower my bill for what I am getting/using, b) have a DVR, and c) have consistant locals in HD. I want my NFL in HD...period. whoever can give me the most of this will get my business. But since the sunday ticket is still SD, I'm sticking with voom...
 
But the Sunday ticket is offering 4-6 games a week in HD.
 
High Definition said:
Excellent article on VOOM. :yes High Definition is awesome!
Welcome to the forum... BTW... High Definition you are truely in the right place... this forum is all about you... you might even find out a few things about yourself you didn't know...
 
I wonder if High Definition is True High Definition, looks like a wolf in enhanced clothing if you ask me.
 
And then today, Saturday, comes this far less optimistic story in Newsday, which covers Cablevision's home turf on Long Island, NY (and there is a very similar story on the Wall Street Journal website, too.) :

Cablevision finds Voom getting poor reception

BY HARRY BERKOWITZ NEWSDAY STAFF WRITER September 10, 2004

Voom is slowing down.

The sign-up of new subscribers slowed in July and August at the already struggling nationwide satellite TV service that Cablevision Systems Corp. launched less than one year ago, the company revealed in a new regulatory filing.

"Unless we are able to reverse this trend and grow our customer base quickly and significantly, we are unlikely to have a successful" direct broadcast satellite business, Cablevision said in the filing with the Securities & Exchange Commission.

As of Aug. 31, Jericho-based Voom had 28,700 customers, with another 1,200 awaiting installation, up from 25,000 active customers June 30. Since launching the service in October, Voom has lost three of every 10 customers who signed up.

Voom competes with DirecTV and EchoStar Communications, which have a total of more than 23-million subscribers, and with cable companies, which have about 70 million.

Adding to the challenges for Voom, which stresses high-definition TV channels, DirecTV said Wednesday it will launch four new satellites by 2007 to expand programming capacity, especially for HDTV.

Voom's sign-up rate turned upward in April, May and June but then began to slide after Voom raised prices and scaled back direct marketing efforts "when it became apparent that we could not efficiently install a growing number of customers," the filing states.

Voom depends on outside installers, who have had to learn to install new types of equipment that sometimes has "operational issues."

"To be successful, we will need to have the capability to quickly install numbers of customers significantly in excess of the number of installations that created problems for us in June and July," the filing states.

Part of the problem lies in the digital antennas Voom provides to pick up local TV stations. Based on surveys of customers who cancel the service, "poor reception of local signals is a significant cause of our higher-than-anticipated churn rate," Voom said in the filing.

Voom, which until March 31 offered free service and until Aug. 1 offered free equipment and installation, is also having a big problem with freeloaders.

"We have a large number of installed customers who have never made any payments to us or who are otherwise not current in their payments to us," the filing states. "We have begun actively seeking to bring these accounts current or to terminate service."

To cut back reliance on direct marketing, Voom also is seeking to expand its network of retail outlets, which consists mainly of 1,600 Sears stores that have provided less than 5 percent of subscribers.

For 2004, Voom posted losses of $36 million in the first quarter and $61.6 million in the second quarter.

The regulatory filing is part of the company's preparation for the spinoff of Voom, along with three cable TV channels Cablevision owns, as a separate company with its own publicly traded stock. That spinoff is scheduled for this month, although it first must get SEC approval.
 

Cablevision's Voom Reveals Slowing Subscriber Sign-Ups

The Inner Circle - September 2004

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