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IS VOOM DOOMED?

Oct 20, 2003  •  Post A Comment

Cablevision CEO James Dolan’s New York Knicks narrowly lost a championship series to the Houston Rockets in 1994. Now Dolan may find that his latest encounter with rockets-or at least the satellites they launch-will be even less successful.
Cablevision, which provides cable TV service to the New York metropolitan area, last week kicked off a national satellite TV service called Voom. Challenging DirecTV and EchoStar, Voom offers more than 100 channels, including 39 high-definition TV channels. The dish, which will be sold exclusively at Sears, costs $749, plus monthly programming fees.
Dolan has embarked on what is either a fool’s errand or a brilliantly conceived mission. While his two satellite rivals provide fewer than 10 hi-def channels, Voom’s lineup is a dream come true for HDTV owners. The new service includes more than 20 exclusive hi-def channels, including one for music fans and even hobbyists. If you’re an HDTV owner, Voom would look good in your living room.
However, Cablevision has spent nearly $1 billion on Voom and it seems unlikely the company will ever recoup its investment. In fact, I think Voom is already doomed. And here’s why:
Voom is targeting the wrong audience: Fewer than 7 million people have HDTV sets, and perhaps as few as 2 million actually have the digital tuners required to receive hi-def signals. Although the HDTV numbers are growing, Voom’s target audience is too small.
Voom will be co-opted by DirecTV and EchoStar: The new service may pick up some early hi-def subscribers, but look for DirecTV and EchoStar to counter that by expanding their HDTV lineups in the coming months. Voom’s biggest selling point could be wiped out by the middle of next year.
The satellite TV business has matured: DirecTV and EchoStar, which have been in business for a decade, now have about 20 million subscribers combined. Although satellite TV officials are loath to admit this, there may be only 15 million to 20 million potential subscribers still out there. (Many viewers cannot get satellite service because they either live in apartments or do not have a residence with a clear southern view of the sky.) DirecTV and EchoStar, which have spent billions on marketing and branding, would seem well positioned to get the lion’s share of new subs. For Voom to succeed, it would have to take subscribers away from the existing services or somehow manage to leapfrog them in marketing awareness. With Voom’s $749 price tag-hundreds of dollars more than DirecTV or EchoStar-well, good luck.
I predict that Cablevision will eventually sell Voom to either DirecTV or EchoStar, though Dolan scoffs at the notion. In a recent Forbes magazine article he said: “It’s silly. … If all we had in mind was putting together the assets to sell, we’ve certainly gone about it the hard way.”
As the Knicks have learned of late, sometimes the hard way is the only way.
Phillip Swann is president and publisher of TVPredictions.com. He can be reached at Swann@TVPredictions.com.