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Programmers stake out space on digital tiers

Jul 23, 2001  •  Post A Comment

Specialization has become one of digital cable’s most recognizable attributes. These days, it seems like there’s something for everyone and then some across the channel lineup. Networks that couldn’t exist a decade ago, due not only to lack of space but also to lack of an audience, can now find a home on the digital tier with the rise of narrowcasting, or programming targeted to a highly specific segment of the public.
Discovery Networks, A&E Television Networks and HBO/Cinemax are among the networks to have launched specialized digital channels over the last five years, and each subscribes to a slightly different philosophy.
Discovery Digital Networks counts six digital channels among its offerings. “Our strategy was to provide product to help [multiple system operators] drive digital and grow digital. Affiliates are looking for ways to provide more content and more options for consumers,” said Lori McFarling, senior vice president of marketing and distribution strategy for Discovery Digital’s affiliate sales and marketing group.
As such, Discovery Digital Networks doesn’t actively try to drive tune-in, or ratings, for its digital networks as it does for its analog channels. The mass audience simply isn’t there, she said. However, Discovery Kids, Discovery Science and Discovery Wings have almost fully penetrated the digital universe, since each of those networks counts 15 million subscribers. The Carmel Group estimates there will be a total of 15.9 million digital customers in the United States at the end of the year.
Digital networks, though, aren’t just about helping MSOs-Discovery and other digital networks wouldn’t be in this business if they didn’t think they could make a profit. Charley Humbard, senior vice president and general manager for Discovery Digital Networks, said he expects at least one of the company’s digital networks to become profitable within five to seven years. That’s because Discovery uses its infrastructure to lower expenses by drawing on its existing affiliate sales and ad sales staffs. “It means we can build our [digital networks] on the backs of other brands,” he said.
In addition, the new channels would not be possible without the library of material to draw upon from Discovery Communications. At least half the programming on Discovery’s digital networks has been previously developed for other Discovery channels. Discovery Science, for instance, culls about 50 percent to 70 percent of its content from the library, while the remaining 30 percent or more is new or original programming, including acquisitions.
Airing only recycled material from the analog networks isn’t enough to satisfy the enthusiast-type viewer who tunes into Discovery Wings or Science, Mr. Humbard said. Discovery Science, for instance, airs on weekdays its original “Science Daily,” which looks at scientific news and breakthroughs. The network’s Friday night show “Electric Playground” provides information on video games and includes interviews with game designers.
A&E Television Networks has also found that viewers cannot live on repurposed content alone. The company’s two digital channels-Biography Channel and History International-have a budget for some acquisitions, such as the blocks of French and Spanish programming that air on History International. Still, the majority of the content is from History Channel and A&E.
Biography Channel consists of “Biography” episodes, movies, documentaries and interstitial programming, with each night of the week bearing a different programming theme. The company has more than 900 “Biography” episodes in its library and produces more than 100 each year. “It’s a chance to build additional programming around these strong brands. The trademark value and brand value of `Biography’ is
so strong,” said David Zagin, senior vice president, affiliate sales, A&E Television
Networks.
A&E Television Networks doesn’t produce originals for either digital network, since the eyeballs aren’t there yet to justify the economics. The company doesn’t release subscriber numbers for its digital channels, but Mr. Zagin did say he expects to produce originals when they approach the 20-million-subscriber level. He added that he anticipates the networks will achieve profitability within the next five years.
HBO, in contrast, is not aiming for profitability for its digital channels, since they don’t generate any revenue. The HBO/Max Pak multiplex package contains seven HBO and eight Cinemax channels. The digital networks are based on a completely different business model, said Dave Baldwin, senior vice president program planning for HBO and Cinemax. The networks don’t cost any more for the operator or the customer. The payoff for HBO comes in an increasingly longer subscription period for customers. “The more value you give to customers, the longer they stay on. In a very crowded market, the key to success is getting people alternatives,” he said.
About 95 percent of the content has previously aired on the main HBO channel at some point, he added. The purpose of the multiplex channels is so viewers can watch the shows on their own schedules. “Saturday Night Fights,” for instance, runs on HBO Plus the morning after the boxing matches originally air.
Digital networks tend to target a slightly different audience than their analog counterparts. Biography Channel seeks a more contemporary, younger audience and packages the networks interstitials and logos in that vein. History International also aims for a younger audience by offering programs with more color than black-and-white footage. The channel also attracts ethnic audiences.
Said Jim Stroud, an analyst with the Carmel Group, “Offering digital channels gets these networks on the good side of MSOs and it helps them monetize their assets by reusing a lot of their legacy content.”