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Utopia Theater: Who's VOOMing Whom?

Michael Fremer, February, 2005

The king of HD satellite service sells some of its assets to competitor Echo Star.

A press release arrived in my email inbox just the other day announcing that Cablevision was throwing in the towel and selling off certain VOOM assets—specifically its Rainbow 1 satellite and FCC licenses to operate DBS services on 11 frequencies from the satellite's orbital location as well as ground facilities in South Dakota—to Echo Star (providers of DISH Network) for $200 million cash. "VOOM will continue providing service to its customers during a transition period," according to the release. The transaction is subject to regulatory approvals, and what will ultimately happen to VOOM, the equipment, and the programming remains up in the air.

This news was not unexpected in many quarters, and it certainly was welcomed by Cablevision's board of directors, its stockholders, and Wall Street analyst-types. You know: the "bottom liners" with not a whit of imagination, foresight, or guts, who declared HDTV "dead" a year into its introduction because there was no "business model" demonstrating a "profit motive."

Coverage in the financial media of HDTV in general and VOOM in particular has been jaundiced at best and fraudulent at worst. True, VOOM has invested ("lost" is the word used in the hostile press) $75 million so far to build its DBS system and suite of exclusive programming. For instance, Wall Street Journal reporter Peter Grant has been positively malicious and/or ignorant in his coverage of this story, which has read more like a venomous gossip column than one having to do with technology or finances.

Then there was an "analysis" of the VOOM shut down in The New York Times by Andrew Ross Sorkin and Geraldine Fabrikant, who claimed that, "Sales of high-definition televisions and demand for programming to match have not materialized as fast as. . .many analysts had predicted." Out of whose butt did they pull that one? Most analysts predicted and rooted for an HDTV melt-down, so any sales would have surpassed their predictions.

In predicting the doom of VOOM a few months ago, The Wall Street Journal's Grant made comparisons with well-established services DirecTV and DISH Network—which have millions of subscribers compared to upstart VOOM's roughly 26,000—while failing to mention the high-definition distinction, which was VOOM's very reason for existing. By not mentioning VOOM's upscale, HD positioning, Grant made Cablevision Chairman and visionary Charles Dolan sound positively wacky for championing a third satellite service when there are already two competitors.

In later columns, Grant acknowledged HD but claimed that VOOM was having difficulties because the other services had added HD channels. Right. Show me a DirecTV subscriber with an HDTV and I will show you an unhappy DirecTV subscriber. DirecTV offers a pathetically limited roster of seven regular HD channels (ESPN, Universal, Discovery, HDNet, HDNet Movies, HBO, and Showtime), compared to VOOM's 39. Just before the plug was pulled, VOOM had closed the gap in its SD channel lineup, to become a no-brainer conversion for unhappy DirecTV and DISH HD customers (with the exception of NFL football fanatics). DirecTV plans a major HD upgrade beginning this year, but only for spot-beaming local HD broadcasts. According to a September 2004 press release, it won't be until "early 2007" that the service will launch two more satellites, giving DirecTV the capability of adding up to 150 new national HD channels to its roster.

Meanwhile, VOOM had the HD bandwidth now—more than a two-year lead over DirecTV—to capitalize on the HD boom. And I've heard rumors that DirecTV subscribers might have to scrap their dishes and receivers when the upgrade happens, but that's just a rumor.

I met with VOOM executives at CES to get an update on its long-promised HD PVR and to question the company's lackluster advertising and promotion, having been positively dazzled the day before at a Sirius Satellite Radio press event—and not just because the Dallas Cheerleaders paid a visit. That event was one of the most exciting and effective press events I have ever attended.

VOOM's $75 million investment had gotten them a paltry 26,000 subscribers since the service was rolled out third quarter of 2003. That is weak. The explanation I got was that before making a big promotional splash, VOOM wanted to work out the technical kinks and enhance the programming. When the "churn rate" (the number of subscribers canceling the service versus the number of new subscribers joining) reached equilibrium, the plan was to commence an aggressive new campaign to attract dissatisfied DirecTV and DISH HD subscribers and new HDTV buyers. I was told that the churn rate had stabilized, and that with the recent addition of a new satellite and more stations, and the soon-to-be-announced HD PVR and home network system, VOOM was preparing to launch a new push for subscribers.

Cablevision chairman Charles Dolan—one of the industry's true visionaries and the man behind VOOM—was instrumental in establishing HBO, Bravo, and many other pioneering and fabulously successful efforts in the pay/cable TV arena. He was laughed at when starting those ventures ("Pay for TV? No one will ever pay for TV!"), but he had the last laugh.

Now, the joke's on him: the demise of VOOM represents one of the greatest failures of the imagination in consumer electronics history. That the decision to shutter VOOM came as a result of Dolan's son James's betrayal of his own father, not to mention his support for Cablevision's Board of Directors and their myopic, short-term, bottom-line thinking, makes it a tragedy of Shakespearean proportions.

Had it been taped, the January 20 Cablevision board meeting where all of this went down (and the meetings leading up to it) would have made shows like The Apprentice, Survivor, and the rest of reality TV pale by comparison. VOOM, the Television Series—now there's a reality show I'd pay to watch! What will EchoStar's Charlie Ergen do with his new VOOM booty? Stay tuned!

Oh, by the way, bye Michael Powell—except for the idiotorial writers at The Wall Street Journal, you will not be missed.