Adelphia in VOD, HD Content Deal

Sep 27, 2004  •  Post A Comment

Even though Adelphia is heading down the path toward a likely sale, it still plans to bolster its lineup of new services, including video-on-demand and high definition.

To that end, Adelphia recently signed a new deal with Discovery Communications that includes digital and analog carriage as well as high-definition service Discovery HD Theater and Discovery’s new VOD service, launched earlier this month on Comcast systems. The deal represents both an expansion of Adelphia’s HD plate and its first foray into basic-cable content on-demand.

In addition, the deal is noteworthy because it’s the first all-encompassing deal for Adelphia with a basic cable programmer. Deals like this are just starting to become more common in the industry, and they speak to the value that cable operators place on their HD and VOD offerings as competitive differentiators.

Multipurpose Strategy

Adding new HD and VOD content not only helps Adelphia remain competitive operationally today, it helps spruce up the company for potential buyers, said David Joyce, senior equity analyst with J.B. Hanauer in Hallandale, Fla.

“It’s a multipurpose strategy,” he said. “They do have to remain competitive to provide the different services that differentiate cable from satellite. It does make [Adelphia] more attractive,” he said.

The sprawling Discovery relationship marks the beginning of an expansion of the VOD category for Adelphia; Discovery on Demand will be the company’s first free VOD service. Previously, the operator has offered only movies, library titles and subscription VOD content from HBO, Showtime and Starz!-totaling about 300 to 400 hours per month. Discovery on Demand alone includes 75 hours per month of content culled from Discovery’s 14 networks.

“We are in the process of obtaining a lot more content for our VOD platform,” said Judy Meyka, senior VP programming for Adelphia. “We are definitely talking to other cable networks about VOD content.”

Expanding VOD

Adelphia also plans to expand VOD availability to two or three more markets this fall, bringing its total VOD markets to five or six by the end of the year, representing about 50 percent of its digital footprint or about 1.1 million of its 2.2 million digital cable customers. The operator has already deployed VOD in Los Angeles, Cleveland and Bethel Park, Pa.

While Adelphia declined to specify the length of the new deal with Discovery, Ms. Meyka said that it was necessary to wrap up programming agreements for the next year.

“I feel fairly comfortable that we’re not going to be sold or come out of bankruptcy this year, so I knew they needed to be done,” Ms. Meyka said. “We need to make sure we are covered for the next year.”

While Adelphia had deals in place with Discovery’s analog and digital channels, it hadn’t inked any agreement for HD or VOD content. As such, it made sense to include those services as it ironed out a new contract.

Deals to Stay Intact

Adelphia has deployed HD in the majority of its larger markets, with a lineup that usually includes the broadcasters, premium services, HDNet and HDNet Movies and the two iN Demand HD channels. Discovery HD Theater will be added starting later this year.

While Wall Street seems certain that Adelphia will be sold, the deals it negotiates beforehand are likely to stay intact, Mr. Joyce said, despite the recent high-profile litigation that Comcast and Starz Encore were engaged in over past programming deals with AT&T Broadband.

That litigation, which was settled earlier this year, was due to the fact that Starz Encore and AT&T were related through Liberty Media, rather than simply because Comcast was the new owner of AT&T’s systems.

“I would say the current Adelphia contracts are probably more likely to remain in place than those old AT&T broadband contracts,” Mr. Joyce said.

Adelphia reaches 94 percent of its customers with a two-way or greater 550 MHz plant, up from 71 percent in March 2003.