Voom Could Be on Road to Doom

Nov 22, 2004  •  Post A Comment

By Jennifer Pendleton

Special to TelevisionWeek

Nobody has ever claimed launching a tech/programming service is easy-especially one in which the start-up company must outmaneuver highly aggressive direct broadcast satellite competitors such as Rupert Murdoch’s DirecTV and EchoStar Communications’ DISH Network.

That’s what Voom is attempting to do as its owners try to convince skeptical Wall Street analysts there is sufficient upside to warrant its estimated $1 billion investment price tag,

After a somewhat rocky initial year in business, Voom, which bills itself as the first comprehensive high-definition satellite service, is being spun off by parent company Cablevision Systems Corp. along with some other assets into a new entity, Rainbow Media Enterprises. It’s a move designed to quiet Wall Street critics, who have lamented Voom’s negative effect on earnings for Cablevision, the nation’s sixth-largest multisystem cable operator.

Jericho, N.Y.-based Voom didn’t make executives available to be interviewed for this story during the securities laws’ so-called “quiet period” for companies in transition.

A Voom spokeswoman said the company doesn’t release subscriber numbers, but according to a regulatory filing, Voom had 28,700 subscribers as of Aug. 31. The figures showed that three out of every 10 new customers eventually dropped the service.

Once the Rainbow Media spinoff is completed, newly funded Voom will have to raise its profile among its key target: upscale purchasers of expensive high-definition TV sets. In recent months, Voom retooled pricing, offering complete purchase of equipment, standard installation and packaging at $499, a drop from its original $750 equipment purchase price. It also offers rental options. Program packages cost an additional $40 to $80 a month.

Voom’s retail partners include Sears Roebuck & Co., BrandsMart USA and Crutchfield Corp.

During Voom’s launch press conference in 2003 company management spoke of an eager public clamoring for more high-definition programming and pondered a future in which HD TV set penetration is substantially higher than current levels.

Despite setbacks, Voom management is forging ahead. It recently secured a movie rights deal for 193 films from Miramax Films and its Dimension Pictures unit for a reported $10 million to $15 million license fee.

At present Voom offers 39 HD channels, 21 of them original services produced through Cablevision’s Rainbow programming arm, including networks built around auctions, museums, extreme sports, news and other subjects. It also offers more than 80 standard-definition channels.

“The good news is that there really is something different about Voom,” said Josh Bernoff, principal analyst with Forrester Research in Cambridge, Mass., when asked about Voom’s original programming. But Mr. Bernoff said Voom faces a formidable marketing challenge-stoking public awareness with sufficient skill to convince would-be customers to sign up for a completely new satellite service and an array of unknown channels.

“That’s a tall order,” Mr. Bernoff said. “If DirecTV and EchoStar had inadequate HDTV offerings there might be an opening here, but in fact, there’s extensive HDTV both on DirecTV and EchoStar.”