Buying SVOD off the `Rack’

Oct 29, 2001  •  Post A Comment

Cablevision has debuted its niche-targeted subscription video-on-demand service, which is now available to more than 550,000 digital-tier homes in the New York City area.
The service, known as Mag Rack, includes 10 “magazines,” each aimed at a “super-niche” of hobbyists and special-interest enthusiasts. The initial offerings target wine lovers, birdwatchers, brides, motorcycle enthusiasts, science buffs, classic-car fans, vegetarians, “natural-health” mavens, photographers and American Catholics. By the end of the year, there will be 10 more video magazines, said Josh Sapan, president of Rainbow Media Holdings, the Cablevision subsidiary that has been developing the new service for the past two years.
Mag Rack is the first iteration of another direction for VOD and SVOD, which until now have been touted mostly as new delivery systems and new revenue streams for movies and on-demand programs from Starz!, HBO, Showtime and other premium channels.
Mag Rack subscribers will be able to access hundreds of hours of subject matter, both acquired and produced in-house, in their own areas of interest. And because the video magazines are delivered via server-based SVOD, any program can be stopped, started, rewound, paused and returned to at will.
Mr. Sapan said he expects it to take about 48 months for Mag Rack to become profitable. Once Mag Rack is available “in the range of half” the homes with VOD and SVOD capabilities, it will be profitable, he said.
Rainbow intends to roll out Mag Rack beyond Cablevision systems and will have to deal with such issues as adapting Mag Rack’s interface to individual multiple system operators, distributing different types of feeds to different MSOs and the capacities of individual servers, according to both Mr. Sapan and Matthew Strauss, executive vice president and general manager of Mag Rack. Server capacities will cease to be an issue “over time,” Mr. Sapan said.
Currently, Mag Rack has a staff of about 30, with another 30 free-lancers on hire, according to a Rainbow spokeswoman. Content that is not produced in-house will come from museums, companies that produce training films, specialty home-video “middlemen,” businesses promoting tourism and other interests and the government. Mag Rack is having “active conversations with many established magazines” as well, Mr. Sapan said.
The next set of Mag Rack video magazines will target 10 additional groups of enthusiasts (probably including basketry hobbyists) who meet Rainbow’s criteria, which include “size and scope” of the group, self-identification as part of the group, “passion,” and a willingness to part with money, Mr. Sapan said.
Currently, Cablevision digital-tier subscribers can take the entire digital package-which includes a multitude of premium channels, on-demand programming, e-mail, a music tier, games and other services-for $19.95 per month (rising to $29.95 per month at the beginning of 2002), or they can take the individual packages on an a la carte basis. Mag Rack is part of the on-demand package, which is available for $9.95 per month.
Other MSOs may choose to “ingrain” Mag Rack in their digital tier, as Cablevision has done, or they may choose to pull it out for separate pricing. Focus groups have shown that when Mag Rack reaches the 30-title level, enthusiasts generally will be willing to pay $2.95 per month per video magazine or around $14.95 per month for the entire package, Mr. Sapan said.
Of course, MSOs that ingrain Mag Rack then can tell their VOD subscribers that they are getting a $14.95 per month value at no extra cost.#