Content provided in partnership with

Multiplex mentality

At some point, video-on-demand may force premium networks and their cable operator clients to rethink whether the world really needs eight flavors of HBO, 12 Showtimes and 12 multiplex channels from Starz Encore.

But not for a while.

That's the way executives at the leading premium programmers see it. They expect the dozens of multiplex channels that digital cable has spawned to remain in place, even if the channels don't readily translate into subscription VOD.

"My favorite movie of all time is Casablanca, and I have it in my video library," says Mark Greenberg, EVP of corporate strategy and communications for Showtime Networks. "I can pop it in my video recorder any time I want and watch it."

Most Popular Articles in Technology: An overview of continuous data protection; Why all those current ratings?; Many countries now have a mobile penetration rate above 100%, report says; The Tata Group's big telecom gamble: VSNL's recent acquisition of Tyco ...; MEASURING BANK BRANCH EFFICIENCY USING DATA ENVELOPMENT ANALYSIS: MANAGERIAL ...; More »

And yet, when does he tend to watch it? Whenever it's on Turner Classic Movies.

It's for that reason Greenberg believes both linear channels and on-demand services can coexist. And it's why Showtime plans to offer a full lineup of multiplex channels for the foreseeable future.

"I think that we always have to remember that there are certain people that are willing to engage in television as an active medium," he explains. "But for most of us, it's a passive medium."

Even as programmers roll out on-demand brands, they are carefully tending existing channel lineups. "We're looking at that on a daily basis to make sure it's still working," says Dave Baldwin, EVP of program planning at HBO. "But we're also expanding out into SVOD and finding out as much as we can about how that product works."

The invention of multiplex channels has helped drive premium television to become what is estimated to be a $12 billion category.

"You used to be able to get one, two, even three channels in analog for 12 to 14 bucks," said Jillaina Wachendorf, SVP of marketing for Starz Encore Group. "When you're talking to consumers now and you say 'you get 12 channels for $10,' that means something. And that's the way CSRs sell it for the most part."

Although those channels - HBO2, Showtime Extreme, Black Starz - are building their own brand equity, they're rarely marketed as standalone channels.

"I think there's awareness out there," says HBO's Baldwin. "By the same token, I think it's fair to say we've spent a lot more money registering the primary brand of HBO and the primary brand of Cinemax than we have any of the plex channel brands" with the exception of HBO Latino.

Right now, SVOD appears to present the big opportunity.

"You have 18 million digital households, about 90% of them have premium, 85% of those are multi-premium," says Showtime's Greenberg. "We think that there's a larger percentage of those people who are willing to subscribe to on-demand."

But there's an important caveat. "If you give it away for free, there's no opportunity," Greenberg notes. "If you charge for it, there's money to be made. Even 25% of the digital households [is] a large number."

The cable industry is still coming around on a pricing model for SVOD. Some operators, led by Time Warner Cable, prefer category pricing. For a single monthly charge, customers get on-demand access to any of the premium services to which they subscribe. Cablevision Systems is going with an a la carte plan that gives subscribers the option to pay for on-demand access to individual premium services.

"Consumers see the on-demand features as value they will pay for. That's not even true on all the digi- nets," says Starz's Wachendorf. "That's one of the things that contributes to digital churn. People buy digital but then they say 'I'm getting more of what I get in analog. Do I really want to pay for that?'"

But while churn is a problem with digital, SVOD has been leading to a more satisfied digital customer base - a customer base not only more likely to subscribe to premium services, but more likely to buy pay-per-view programming.

"We attribute that mostly to the fact that [with] an SVOD service you can play with [it] and get comfortable with the technology," says Wachendorf. "A lot of people may not [have wanted] to do it because they don't want to make a mistake and get charged for something they didn't intend to [order]."

The business model programmers really don't like is giving away on-demand content for free. Some operators see that as a way to drive deployment of digital set-top boxes in order to meet Wall Street expectations about the delivery of new services.

"They're missing the bigger picture," says one programming executive. "The cable operators have never been good at transactional marketing. The industry's core competency has always been as packagers, and premium television is the consumate example of that."

While programming executives insist multiplex channels will continue to be important as on-demand capability spreads, they aren't pushing those brands onto SVOD menu screens.

Technology Industry

Multiplex mentality

Cable World, April 21, 2003

Find Research Guides for:

Find Featured Titles for: News

Most Popular Articles in Technology

Most Popular Publications in Technology