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VOOM Unveils Enticing Channels

By | October 20, 2003

      NEW YORK — Rainbow DBS faces numerous obstacles in its attempt to become the third high-powered satellite TV services provider in the United States. But that has not stopped it from taking the early lead in offering distinctive high-definition programming.

      The DBS subsidiary of Bethpage, N.Y.-based Cablevision Systems [NYSE: CVC] unveiled an impressive strategy to tap into demand for high-definition television (HDTV) last week by introducing a program lineup of 21 exclusive new HDTV channels.

      The key to competing with two entrenched DBS players is compelling content, said Cablevision Chairman Charles Dolan. VOOM, the service launched Oct. 15 by Rainbow DBS, is differentiating itself from existing satellite TV and cable operators by offering a comprehensive array of commercial-free, HDTV channels via its new high-powered satellite to customers throughout the continental United States.

      “We don’t see ourselves as the third entrant in an existing market,” said Mickey Alpert, a satellite TV pioneer and chief operating officer of Rainbow DBS, during an interview with SATELLITE NEWS. “We see ourselves as the first entrant in a new market — HDTV.”

      To entice subscribers, VOOM will give charter subscribers free service through the end of January 2004, along with far more high-definition (HD) programming than any other satellite or cable operator now offers, Alpert said. Customers of VOOM will have access to the 21 exclusive HD channels provided by sister company, Rainbow Media, along with 36 standard definition channels, supplemented by six Starz!, seven Showtime, two Showtime HD, one Disney HD and 18 music channels, he added.

      The VOOM system also includes an HD tuner, since many early-generation HDTV sets do not have one, as well as an antenna to receive over-the-air digital local broadcast channels delivered in standard definition (SD) and, if available, in HD, Alpert said.

      With the addition of new channels in February 2004, customers will have their choice of 39 HD and 88 standard-definition channels, including more than 40 cable offerings. In addition, Rainbow DBS has teamed with programming partners such as the NFL Network, Playboy, Discovery HD Theater and Starz! to offer consumers premium movies, sports and entertainment channels in high-definition for an additional price above the standard monthly subscription fee of $39.90.

      Sears, one of the largest U.S. retailers of HDTV sets, last week began selling the VOOM equipment, priced at $749 and requiring an accompanying HDTV set, through its 851 full- line stores and 772 Sears dealers stores across the country. Consumers can also order VOOM by calling 1-800-GET-VOOM.

      The availability of VOOM’s exclusive HD programming is a significant breakthrough that could spur the sale of HDTV sets.

      Major networks right now offer a limited number of prime time shows in HD, as well as some sports programming. Aside from selected cable channels that are offered in HD, the amount of available programming is limited.

      Until now, a lack of HD programming has been the single largest hurdle preventing the widespread adoption of HDTV sets by U.S. consumers, said Dan Laughlin, senior vice president and general merchandise manager of appliances and electronics at Sears, Roebuck & Co. [NYSE: S].

      The first question prospective customers typically ask about HDTV is what programs are available, said Lauren Jiles-Johnson, a Sears spokeswoman. Now, the sales people can show them the 21 exclusive HD channels offered by VOOM.

      Sears installed in-store displays of the VOOM system nationwide last week and will begin to feature VOOM in its Sunday newspaper-advertising circular Nov. 16, said Jiles- Johnson. Since the alliance between Sears and VOOM was not finalized until this fall and advertising preprints require long lead times, the Nov. 16 circular is the soonest that the nation’s third largest retailer of big-screen televisions could promote the new satellite TV service, she added.

      Sears also will feature VOOM in two advertising circular preprints in December, as well as include it in a customer mailing the same month that will be targeted at its credit card customers.

      “We made an enormous investment in selling HDTVs,” Jiles-Johnson said.

      As a major retailer of appliances and consumer electronics, Sears showed its commitment to big-screen TVs by doubling the number of plasma and liquid-crystal display (LCD) televisions it carried last year to 21 models from nine manufacturers. Many of those are HDTV sets, Jiles-Johnson said. Sears, the first national retailer to display HDTV programming on its sales floor, sells nine HDTV brands. Sears is offering an HD-ready 43-inch television during intermittent promotions for a special price of $799.

      Rainbow DBS started its marketing campaign last week with advertisements in national newspapers. The company’s business strategy is simple: target the underserved HDTV market with the most comprehensive selection of HD programming – using the best and most efficient technology, Alpert said.

      “We’re going to take advantage of the fact that over 25 million households will be making a choice of pay-TV providers over the next three years,” Alpert said. “We think we have an attractive consumer proposition that will encourage many of them to migrate to HDTV, and specifically to choose VOOM. With an HD focus as our foundation, VOOM is launching with significant competitive advantages.”

      Industry analysts offered mixed reviews about VOOM’s prospects.

      “VOOM in 2003 is to HDTV what DirecTV was to the multichannel industry in 1994,” said Jimmy Schaeffler, a satellite and media analyst who heads the Carmel-by-the-Sea, Calif.- based consulting firm The Carmel Group. “It raises the bar for every competitor, while bringing more value to consumers of affordable, quality video (and audio) services. It makes the industry that much better.”

      Derek Baine, a satellite TV analyst with Kagan World Media, of Carmel, Calif., said, “I think it could be an attractive offering next year if they bring out DVR [digital video recorder] boxes and significantly lower the entry level price point. The hardware price they are quoting is too high to make it attractive to most consumers. They are probably trying to copy the DirecTV strategy when they launched; cherry pick the first customers that will pay anything to get the new gadget, then see where the demand curve is and drop the price point accordingly.”

      Alpert responded that the pricing of the VOOM equipment is comparable to what DirecTV and EchoStar Communications [Nasdaq: DISH] charge for HD set-top boxes, if you factor in the VOOM service’s free installation, HD tuner, other technology advances and off-air antenna for local channels. “I don’t think we’re gouging the consumer by any stretch of the imagination. I think the value is compelling.”

      Bruce Leichtman, president and principal analyst with Leichtman Research Group, of Durham, N.H., said the choice of mass-market oriented Sears to sell a high-end consumer electronics product seemed to be a “paradox.” He said the situation would be analogous to selling upscale BMW automobiles at a Hyundai dealership.

      Alpert disagreed. He explained that Sears is a well-established and popular retailer that is making an early commitment to VOOM just in time for the holiday-selling season. Both sides will benefit, Alpert said. –Paul Dykewicz

      (Mickey Alpert, Rainbow DBS, 516/803-2428; Charles Schueler, Cablevision Systems, 516/803-1013; Lauren Jiles-Johnson, Sears, 847/286-0123; Jimmy Schaeffler, The Carmel Group, 831/643-2222; Derek Baine, Kagan World Media, 831/624-1536; Bruce Leichtman, Leichtman Research Group, 603/397-5400)

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