Gary Arlen /
05.04.2005 12:00 AM
Cable Sends Mixed Messages
Despite embracing tech, doubts remain

SAN FRANCISCO

Video-on-demand reigns supreme. In an engaging, but unscientific, poll at each general session of the National Cable & Telecommunications Association's (NCTA) convention here last month, attendees were asked to rank key factors in the cable business during the year ahead, using an interactive device at their seats. Invariably, VOD was the top objective, sometimes notching 56 percent of the votes amidst a roster of five options, usually including digital video recording, high definition TV and voice over Internet protocol (VoIP).

Yet the audience's enthusiasm--and the widespread sales pitches for VOD services at convention sessions and on the exhibit floor--did not always match the reality preached by cable system executives or top Hollywood executives.

For example, at a "Hollywood Squires" session featuring studio chiefs, the emphasis was on protecting their current, profitable DVD sales. Hence Disney's incoming CEO Robert Iger envisioned that it will be "10 years out [until] we see VOD rivaling the DVD business." He voiced concern that VOD will "cannibalize" existing revenues and then joked that Disney's "DVD business makes more money than Comcast does, which is why they wanted to buy us"--a reference to last year's unsolicited and eventually aborted Comcast takeover of Disney.

NBC-Universal Chairman/CEO Robert Wright, also on the panel, thought that VOD might emerge a bit sooner--possibly in "five years."

"You can't put any money on the table now from VOD, so it's DVDs today," Wright said.

News Corp. President/COO Peter Chernin, who has overseen Fox's digital initiatives, joined the chorus of technology skepticism, praising DVDs and bluntly characterizing "everything else is a negative: HD [high definition TV] is a cost center, so is launching new networks; DVR threatens our ad business."

Further contributing to the VOD cynicism were skirmishes such as one that erupted during a panel on "On-Demand Advertising."

Jon Mandel, chairman of MediaCom, a New York-based ad agency, accused fellow panelist David Cassaro, president of Comcast Network Sales, of not sharing information about VOD viewership and not giving advertisers or program suppliers a reasonable share of subscription VOD fees. Channing Dawson, senior vice president, new ventures at Scripps Networks, joined the fray, arguing that the advertising community "needs a whole lot more than can be delivered" by cable operators today.

INDECENCY & DTV INDECISION

As the VOD battles raged inconclusively, the firestorm about media "indecency" and DTV also danced through San Francisco's Moscone Convention Center, where 17,000 attendees raced through a compressed 2.5-day agenda.

New FCC Chairman Kevin Martin barely touched on DTV during his quick appearance. In an on-stage interview with Fox News Channel's Stuart Varney, Martin merely acknowledged that the DTV transition will be one of his top priorities.

Martin focused his remarks on indecency, saying, "It will be for Congress to end up figuring out what they think the appropriate rules should be." Martin also said that he encourages cable companies to create a family-friendly programming tier in response to parents' concerns about content inappropriate for children. He called it an "opportunity" for the cable industry "to speak to the consumers and the parents."

Members of Congress at the convention were less reticent in their comments about indecency and DTV.

House Judiciary Committee Chairman James Sensenbrenner (R-Wisc.) said he would like to see criminal prosecution "rather than the regulatory process" used to enforce broadcast indecency rules. He pointedly chastised the FCC fines on stations as inefficient, and said that, "People who are in flagrant disregard [of indecency rules] should face a criminal process."

Sen. Ted Stevens (R-Alaska), visiting the convention and meeting privately with cable executives--but making no public presentation--indicated that he was impressed with the blocking technology that NCTA executives showed him at a Best Buy display. Cable officials who accompanied Stevens on his tour of the show floor said that the Senator and other policymakers were satisfied that the set-top box control capabilities would give parents authority over what their kids can watch; but the cable executives offered no details about the availability of this service.

Sensenbrenner and Rep. Anna Eshoo (D-Calif.) spoke at an invitation-only policy luncheon, during which the DTV transition was a major topic.

"The transition to DTV is long past due," said Eshoo, who sits on the House Telecommunications Subcommittee. "I don't want to go to another hearing with a demonstration of DTV. It's about time. A line is going to be drawn. There were legitimate issues... about the cost of the changeover, [but] it's the time to get this done."

Sensenbrenner took a more measured approach.

"Let's not forget about consumers," he said. "I do think a deadline has to be set and enforced," but he cautioned that the deadline "should be reasonable."

"Once it's set, it should be met," Sensenbrenner said.

As for subsidies to pay for set-top decoders for homes unable to afford such boxes, Sensenbrenner uttered an unequivocal "No," while Eshoo bluntly said that idea is "not going anywhere."

And on the equally contentious issue of digital must-carry (multicasting), Sensenbrenner asked rhetorically "Has the fat lady sung?" and then to much laughter from his audience of cable executives, he answered himself: "The fat lady has a large repertoire."

Sensenbrenner and Eshoo also confronted the much-discussed update of the 1996 Telecommunications Act.

"I am struck by what we didn't know at the time of the '96 bill," Eshoo said. She predicted that there "won't be a wholesale rewrite," but confirmed that "Chairman [Joe] Barton (R-Texas) is committed to doing something." Eshoo warned that "broadcasters had better get set" for changes.

Digital TV was also the topic of several convention sessions, generating mixed messages about cable's rollout agenda.

"We don't have a burning desire to hasten" HDTV rollout, said Roger Keating, president of Time-Warner Cable's Los Angeles division. He acknowledged that "we want to be there," but said, "channel additions are slow" and that "we view the free HiDef tier as a real differentiator to satellite."

Keating also asserted that HD "won't work well over IP networks," an allusion to the looming competition from SBC's fiber optic telephone TV networks that are coming into his territory. He stressed that, "I would like to sell more [HDTV] on the premium tier" and noted that his company has seen "steady but gradual growth of HD, but let's not rule out analog yet."

"It will take a decade, maybe two, before we see all-HD" service, Keating predicted.

Clint Stinchcomb, Discovery HD Theater general manager and senior vice president, said that like most program providers, he is "platform agnostic" about distribution. Stinchcomb observed that customers who have HD service ask when more Discovery programs will be available in high definition format.

"One of the unexpected" questions that Stinchcomb frequently receives is, "When are you going to do 'American Chopper' [a popular motorcycle series] in HD?" He said that the show is now available in high-def.

"What we will do depends on the [cable] operators," Stinchcomb added. "Until the current analog space is reclaimed by the operators, there won't be a rush" to adding HD.

Daniel Darling, executive vice president, Turner Entertainment Group, said, "Eventually we'd like to do everything in HD. Now is the time to kick HD into gear." But he stopped short of committing to an all-HD timetable.

Another panelist, LG Electronics vice president John Taylor, focused on CableCard deployment, urging cable operators to "embrace the CableCard," and acknowledging that the current negotiations for the bi-directional set-top agreement between cable and consumer electronics parties plus Hollywood continues to face "a long, hard road."

iTV REVIVAL

The copyright and related issues affecting CableCard tied into several other NCTA sessions--which also saw a revival of interest in interactive TV, a topic that has been dormant for several years.

Cisco Systems CEO John Chambers, on an opening panel, cited the industry's move "from transactions to interactions"--a deft reference to the renewed attention to interactive TV in its various forms at the convention. Chambers also acknowledged the entertainment industry's over-arching concern about piracy, asking rhetorically, "If you had security, would transactions come faster?"

Fellow panelist Larry Page, co-founder and president of Google, also acknowledged the appeal of interactivity, and teased about his company's plans to move into the video on-screen search and navigation business. Although Page offered no details about such relationships, Google unveiled its role in the newly renamed "Current" network, formerly known as INdTV, headed by former Vice President Al Gore. The youth-oriented network will run homemade videos submitted by its target audience and through a Google alliance, the channel will be promoted online and material submitted. Details of the relationship were not disclosed. Current is now available via DirecTV and a handful of cable systems.

As for the NCTA show itself: interactivity was largely limited to those unscientific polling devices on delegates' chairs during the general sessions.


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