INHD The Three-Year Window: A PPV Model for Hi-Def?


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Supporting Founder
Sep 8, 2003
INHD The Three-Year Window: A PPV Model for Hi-Def?

By Shirley Brady

Three years.

That's how long the executives at In Demand who are overseeing the programming, distribution and marketing strategy for start-up high-definition service INHD estimate they have to make it a success.

With the challenges facing them, they'll be lucky if they last that long, but they're willing to give it their best shot.

During that three-year timeframe, the architects behind INHD's September launch hope to establish a brand and compete with a growing roster of HD networks that includes some of their existing content partners.

That gives In Demand--which faces a shrinking lineup of network content partners, such as TNT, which launches its own HD service next month--a relatively short window to acquire and televise unique-to-HD content from a still-limited pool of production houses and mobile trucks with hi-def capability.

And because upconverting content doesn't cut it with hi-def fans, In Demand also has to pony up to produce original shot-in-HD programming--as they're now starting to do--but with a fraction of Discovery's (or even Mark Cuban's) budget.

Good luck.

INHD and sister net INHD2 see an opportunity in local sports events shot in partnership with regional sports networks. But the nature of those events, which preempt prime time on INHD2, presents tremendous scheduling and marketing challenges.

And let's not forget Cuban, the feisty owner of the Dallas Mavericks and a born marketer, who uses his visibility as an NBA team owner and his personal wealth to champion his rival HD networks.

By the end of INHD's three-year time-frame, more HD converters will be in the field with cable customers and more HDTV sets will be sold, which should lift all early entrants in the hi-def programming space. But the bandwidth needed to increase INHD's distribution and local awareness still will be at a premium for the foreseeable future.

"The challenge is that we have a three-year window, and until that point bandwidth is going to be extremely tight--as tight as it's been in a long time," says In Demand COO Rob Jacobson. "Between now and that time we have to work really hard to establish an identity and a brand and to create an awareness so we have an audience. So at the same time as USA and TNT and E! and other networks are in a position to go HD, hopefully by then we will have developed support and an audience for who we are and what we have."

One problem: Operators aren't ready for hi-def prime time--about 1 million of INHD's 60 million available homes actually have the service today--even though INHD and other hi-def networks are ready.

Another problem: Consumers are still in an early adopter/Best Buy-strolling/ phase, which will continue until CE manufacturer prices plummet sufficiently to drive set sales. Meanwhile, INHD is helping Only Cable Can and other industry initiatives to push hi-def awareness and adoption.

That's why it's critical that INHD complete deals with non-owner MSOs, as it's done with Cablevision and Adelphia. It's a matter of survival.

An Edge in Distribution

In Demand's cable operator owners at Comcast, Cox, Time Warner Cable and Advance Newhouse gave INHD a head start in distribution over its competitors, most notably, Cuban's HDNet.

"Job one for any new network is to get yourself out in front of as many eyeballs as you can, and we're the most widely distributed HD network," says In Demand EVP of marketing Sergei Kuharsky. "

The idea behind launching the channels was to get cable into the high-definition game more quickly.

"We wanted to demonstrate the advantage that cable has in terms of its ability to deliver more in the way of high definition quickly," Jacobson said. "That's why we launched two channels on Sept. 15 and are now contemplating launching a third. The idea is to say, `Only on cable can you get high-definition sports, movies and entertainment,' and that hopefully will go a long way to creating a platform for a sustained differentiation of cable versus satellite."

Although he's eager to license unique HD content for the channels, Jacobson admits it's difficult to find high-quality and affordable programming shot in HD. There won't be much content that's of use to him until HD cameras and editing costs come down and the production community steps up its commitment to the format.

"That's going to change a lot over the next 12 to 18 months," Jacobson adds. "The real challenge that we found is that while we produce a lot of our stuff--we roll a truck to these events and have them produced in hi-def--there's still a very limited number of HD mobile facilities."

The problem, so far, is timing. INHD plans its hi-def shoots 60 days out to get production trucks to where they need to be.

"But when you're trying to shoot hi-def events around a basketball tournament, for instance, the few hi-def trucks are already out on the road, so it's very difficult to book one," he said. "We're still out there beating the bushes to try and find what's available."

As in the early days of cable networks, less content at launch means more repeats. "We try to manage that as best we can," says Jacobson.

He's starting to see more quality hi-def programming coming out of Europe, which launched the Euro 1080 satellite-based HD network in January. "We're trying to get rights that we can trade with them, particularly when there's not much in the way of narration," he says. "When you have picturesque programming with music playing in the background you can certainly play that in Europe and, likewise, they can do stuff and provide that to us."

Playing the Local Sports Card

Because In Demand can't afford to commission original productions shot in HD that even approach the scale of Discovery's $5 million-plus Atlas HD series, it must rely on traditional licensing deals to convert from 35mm film (the best HD transfer procedure) compelling visual content such as IMAX features and archival Olympics footage, in addition to more traditional movie licensing deals with Paramount, Fox and Warner Bros. Its long-standing studio relationships in the pay-per-view arena are being leveraged for INHD, along with titles from Hallmark Entertainment to expand its family-friendly content.

INHD2's most attractive (yet tricky) programming in prime time is with sports from regional sports networks such as NESN or Comcast SportsNet. Fox Sports Net, by comparison, also has deals for local-into-local HD games with Time Warner Cable and Adelphia but doesn't have INHD owners Cox or Comcast on board--yet.

"The local sports card is very attractive to viewers and part of the philosophy of how we set these channels up," says Jacobson. "We programmed the second channel to accommodate those kinds of drop-ins because we recognized the bandwidth strain."

Because those games start in different locations a half-hour apart, INHD2 won't run hourlong programs or two-hour movies from 7 p.m. through 11 p.m. ET because they'd have to be pulled apart locally at one point or another. Instead, the network aims to schedule half-hour starts throughout that block (so viewers can join a program already in progress) and run a longer program at 11 p.m.

To make up for the lack of good HD half-hour programs, this month INHD starts shooting a series of original half-hours with rotating hosts on sports, lifestyle, outdoor and other genres to shore up its prime time and increase the flexibility for local sports. Down the road, Jacobson says operators may want to use INHD2's flexible prime time for some of their own local programming.

As the primary network, INHD is more focused on a "best of cable" approach that puts signature programming from TNT, USA, E!, the Tennis Channel, the Anime Network and College Sports Television, among others, in prime time. INHD will carry three Major League Baseball games a week this season and basketball from NBA TV.

"We'll continue to take that tent-pole programming and establish blocks--and partnerships to promote those blocks--in set times and set dates," says Kuharsky. "We really want to focus on how those marquee events help get us on the map and defined."

That means a potential IMAX-themed night and a family film block--two ideas they are pursuing.

"Because there isn't that much out there, we've had to come up with creative ways to try and develop partnerships to create more programming," says In Demand president Steve Brenner. "That's why we're working with networks and sports leagues and doing more stuff with pay-per-view."

As part of that strategy, last year's Bon Jovi concert was shown in standard def on PPV and 30 days later in hi-def on INHD.

The HD Programming Squeeze

Those sharing arrangements can create co-branding challenges for bigger programmers such as TNT or USA during HD simulcasts. Longer term, INHD's network partners seem likely to take away their hi-def marbles. In addition to the launch of TNT HD next month, Hallmark Channel now is weighing up an HD service, while USA--with which INHD simulcast the Masters golf tournament last week--will be a hi-def cornerstone of NBC's sports and Olympics strategy after the NBC-Universal deal closes next month. In Demand hopes to convince more networks, such as A&E, to present their hi-def programming on INHD before launching rival linear HD services.

"We have our space in the owners' systems, so the trick is to get as omnipresent as we possibly can now, to get our stake in the ground and to continue to improve the programming," Brenner says. "We're not dependent on any one particular network for the bulk of our programming."

Brenner points to a partnership with Comcast's Outdoor Life Network (creator of INHD's hi-def doc, Farther Than the Eye Can See) that will bring a hi-def feed of The Lance Chronicles--showing Lance Armstrong training for this summer's Tour de France--on INHD as a blueprint for other networks.

"[We] are trying to do more together in this space because a lot of the stuff [OLN] wants to license looks great in high definition," he says. "We're trying to come up with ways where we can do some creative partnerships, so they can take it for a period of time and we'll take it for a period of time and we can share in some of the production costs."

The success of the next three years will determine whether In Demand will launch another INHD network, says Jacobson. "At this point I don't see us going beyond a third channel, because for us that hits the basic food groups: entertainment, sports and movies," he says. "The challenge is remaining relevant once more programming services are available in high definition."

The INHD execs also say they aren't concerned about their tight production budget.

"If our programming at some point may not be as compelling because we don't have the budget of, say, a USA or a TNT, I still think there's a lot of relevance that we're going to be able to deliver to cable operators over and above just programming," he continues. "We're a terrific marketing and programming proposition for them today, and three years from now I think the programming will be better."

Those hi-def-defying feats aside, In Demand has no intention of losing focus on its original purpose.

"Our primary business is still pay-per-view and video on demand," says Brenner. "Movie rentals are still over $10 billion a year, and cable has a better way for people to watch that's more convenient, no late fees, you save four trips back and forth to the video store and it's the same viewing experience. So that's the biggest upside for our company and our primary concentration.

"We haven't had any situation where the two would be in conflict," Brenner adds. "The fact that we're able to offer all this stuff on a pay-per-view basis gives us the opportunity to access some programming for INHD which we might not otherwise get. We're trying to take the two pieces of our business and use them together to create something of an even greater strength."

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