At Starz, The Letters Line Up to Spell SVOD

Cable World,  Feb 24, 2003  

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Byline: K. C. NEEL

John Sie wants to retire. But he has a few things to do first. The founder and chairman of Starz Encore Group wants to make sure his company's subscription video-on-demand product is widely deployed. And he wants the world to know that the current high-definition TV standard isn't the best solution for technological, business and U.S. policy reasons. He's willing to go out on a limb to prove it.

All this means, of course, that Sie isn't going anywhere just yet. At this point, Starz On Demand is available to customers in two Adelphia markets and to Los Angeles area customers who subscribe to Altrio Communications' services. There's also an SVOD trial of sorts with DirecTV using PVR technology to download movies to customers. The company also is in the final stages of signing a big SVOD deal with an as-yet-unidentified top-five MSO.

President Mark Bauman says Starz Encore is talking to the major MSOs and expects to sign several affiliation deals throughout the year. The meager launches to date don't discourage Sie or his executive team. He expects to surpass HBO in terms of subscriber counts within the next four years.

"We have more room for growth than the other services, and we are already No. 1 and No. 2 in the fully digital world of DBS," Sie says. That's a fair turnabout from the early 1990s, when Encore was dismissed by critics as a mini-pay full of old and cheaply purchased movies. But the company committed years ago to acquire as much movie product as it could, no matter the cost. And cost it did. Encore spent $1 billion securing films from every major Hollywood studio. Sie says that has paid off handsomely for the company.

First, it allowed Encore to support Starz, a first-run, full-pay movie service that today has exclusive access to 11 of the 24 movies that made over $100 million at the box office in 2002. It also enabled the company to launch 12 themed channels, which in turn secured a good chunk of real estate on digital cable systems throughout the country.

Sie's sales and marketing team is now peddling Starz Encore even harder. "People love movies," says Jillaina Wachendorf, SVP of marketing. "It's up to us to show people we're different from the other services." Starz Encore continues to push for a low-entry premium movie package similar to what the DBS services offer, saying customers will be happier. But so far, few operators are openly pushing such an offering.

The chief initiative, however, remains digital. An engineer by trade and education, Sie long ago recognized the value of digital transmission. The company began securing subscription video-on-demand rights (and subsequently broadband distribution rights) for its entire film product in 1999, three years before SVOD was even a blip on operators' radar screens.

"The studios didn't like it much," says Stephen Shelanski, SVP of program acquisitions, planning and scheduling. "But we fought for it, and we don't do any deals without them now."

"We placed a big bet with on-demand and getting those rights," says Robert Leighton, president of Starz Encore Entertainment and SVP of programming. "But the early indication is that it's being embraced. It's in our nature to take risks. And that's why we've done the things we've done. When the others zig, we zag."

That is pure Sie. He thinks big and generally doesn't do what everyone else does - at least, that is, when they're doing it. In 1987, the Japanese were touting their analog high-definition system MUSE to broadcasters. In Sie's view, MUSE had two major drawbacks: First, it required 9 MHz of spectrum, and second, all TV equipment from studios to consumers' homes would have to be replaced in order to receive the enhanced, wide-screen (16:9 aspect ratio) images. Sie argued that the Japanese wanted to push the system simply to reinvigorate their slumping consumer electronics business.

As the lone voice during testimony to the Senate, House and FCC, Sie argued that the U.S.'s next television system needed to be digital and that such a system would be possible within ten years. In the meantime, he reasoned, the U.S. could use new, domestically developed technology that doubled the resolution of an NTSC picture without using additional spectrum. Not only that, but this new digital technology could be used with existing technology so consumers wouldn't have to buy new equipment.

ABC and NBC eventually dropped support for the MUSE standard in 1990, and the American National Standards Institute then reversed its support for the technical standard - the first time in history the group had ever done so. Subsequently, the FCC decided to withhold a decision on standards until further detailed testing was complete.

Sie hopes he can halt the current march toward HD in a similar fashion. Starz Encore isn't offering an HD product like competitors HBO or Showtime, and it won't until it can come up with an alternative. Sie thinks it will be more efficient and cost-effective. He believes high-resolution TV (DVD quality) is more than sufficient to the human eye. And don't even get him started on the aspect ratios of HD. He is a firm believer that the 4:3 ratio now used in NTSC delivery is better and easier on the eye than the 16:9 ratio now being used to deliver hi-def.