A LOOK AT CABLE, 1994 : Are We Really Close to This?

With 1994 staring us in the face, we are one year closer to the great promise of the 500-channel universe, right? Yes. And no.

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The cable industry heads into the year with its longest wish list ever of planned, promised and pie-in-the-sky channels. But how many of them will make the cut? And more important, how many of the survivors will thrive?

In this “Field of Dreams� world of cable, where ratings seem to matter less than idealism and salesmanship, one specialized network after another is aiming to fill up channel space with everything from aerobic exercise classes to Yugoslavian zither concerts. If you thought there was plenty of competition already, just wait until the Book Network squares off against the History Channel, the Golf Channel challenges the Home & Garden Network, and the Recovery Network pits itself against the Fitness Channel.

“An awful lot of new services are starting up,� confirms Betsy Frank, senior vice president of Saatchi & Saatchi Advertising, who tracks the industry closely. “As in the past, most of these will fail, some will merge, and a precious few will prosper.�

Most new cable channels will not succeed simply because there aren’t enough interested viewers or advertisers to support them, speculates an official at the National Cable Television Association, which estimates there are already about 100 networks--most of them small and unprofitable--with another 50 or so waiting in the wings.

“It’s a risk,� concedes a spokeswoman for Rainbow Programming Services, explaining her company’s decision to launch Romance Classics, a channel dedicated exclusively to movies and TV shows of the heart. “But American women are spending an estimated $750 million a year on romance novels and similar products. We’re convinced that our network will fill a real niche.�

But narrowly focused programming that targets a potentially loyal audience does not always guarantee success. Rainbow’s last national roll-out, the trial-based In Court Channel, survived only by merging with Time Warner’s American Trial Network shortly before its 1990 debut, and industry sources say the result, Court TV, has lost many millions since then.

Nonetheless, it is one of a handful of new cable networks still around after a few years of operation. Others include the Sci-Fi Channel (now owned by the USA Network), the Cartoon Channel (owned by Ted Turner) and Comedy Central (owned jointly by Viacom and Time Warner). Vanished ventures include Monitor Television and the How-To Network. Many others, ranging from the Cowboy Channel to Senior American Network, never signed on.

“Some companies were simply staking out shelf space at a time when systems carrying up to 500 channels through compression techniques were being proposed but didn’t get built,� explains Peggy Ziegler, editor of Cable World, an industry trade publication. “Others were serious-minded but naive newcomers who underestimated the funding needed or couldn’t get commitments from enough cable systems to carry their programming.�

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A flurry of announcements came a few months ago because of “retransmission consent� agreements mandated by the 1992 Cable Act, which reasserted federal control of an industry some legislators believed was endangering the very survival of local TV stations through allegedly monopolistic practices. Under new Federal Communications Commission rules that went into effect in October, most major cable systems have agreed to retransmit local TV stations in return for new broadcaster-produced cable programming.

NBC has joined Fox and ABC in announcing plans to bankroll and produce new cable-only channels. In a striking demonstration of how the balance of power has shifted from broadcast to cable, each network signed cashless deals guaranteeing a cable berth for their immensely popular owned-and-operated stations in return for uncertain investments in new programming.

But unlike ABC’s ESPN2, which launched Oct. 1 under the protective wing and experienced eye of its profitable parent, the other broadcast networks’ are hatching their new channels with only the vaguest of programming concepts, little short-term likelihood of making money and no specific public demand. NBC (which owns the CNBC business/talk channel) will introduce a talk network, America’s Talking. Fox is developing FX, a general-entertainment network of original programming and reruns, to be rolled out on June 1 in association with powerful Tele-Communications Inc., the nation’s largest cable company. Only CBS, which was unsuccessful in its appeal for cash payments for such multiple-system operators, is not launching a cable channel.

Other broadcast groups backing new cable programming ventures include KTLA Channel 5’s parent Tribune (the TV Food Network), Time Warner (the Money Network) and Scripps Howard Broadcasting (the Home and Garden TV Network).

“Both sides (broadcasting and cable) won,� believes Larry Gerbrandt, vice president and senior analyst at Paul Kagan Associates Inc., a Carmel-based media research and investment firm.

But the appearance of a “win-win� situation--broadcasters have been assured of cable audiences, cable systems of high-quality programming--may be deceptive.

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“The fact remains that ABC, CBS, NBC and Fox collectively draw the vast majority of TV viewers, even in homes where scores of cable channels are available,� notes Saatchi & Saatchi’s Betsy Frank.

Indeed, according to the A.C. Nielsen Co., all commercial broadcast stations account for an estimated 73% of prime-time viewing nationally, while basic cable captures 20%, pay cable 4% and PBS 3%. These May, 1993, figures represent all of the 93.1 million TV-equipped U.S. households, of which 62.4% subscribe to cable.

In the Los Angeles-Orange County market, where cable penetration is 58.3%, affiliates of the four broadcast networks enjoy a 56.1% share of the audience during prime time, compared to 25.1% for independents, 16.1% for cable and 2.7% for public TV.

“There are very few instances in which any cable network does appreciable numbers,� observes Rick Feldman, vice president and station manager of independent KCOP-TV Channel 13. “The only thing good about adding cable networks is that their ratings will be so low that somebody will finally wake up and say, ‘This is absurd; we’re only reaching seven people.’ �

Feldman speaks for many broadcasters who seem genuinely bewildered by the amount of attention basic cable receives, considering its relatively small audience.

Yet it must be understood that, with the exception of TBS and the USA Network, cable is a niche business, based on attracting relatively small numbers of like-minded consumers rather than mass audiences. And, unlike broadcasting, cable programmers derive much of their income by assessing fees of up to 60 cents or more per subscriber.

“Services with only 1% of the national audience can and do earn millions of dollars in annual profits,� notes Mark Nathanson, chairman and chief executive officer of Falcon Cable, a Los Angeles-based operator serving more than 1.4 million subscribers throughout the United States. “But will all of the new channels find sufficient viewers and advertisers? Frankly, I’m skeptical.�

Industry insiders agree that while profits are handsome among a handful of cable networks--notably CNN, MTV, ESPN and USA--many, if not most, are struggling to make money. For example, despite the backing of media giants Viacom and Time Warner, Comedy Central has reportedly lost nearly $100 million in its three years of operation and Viacom’s Showtime pay movie channel is barely breaking even after more than a decade. (It must be noted, however, that even broadcast networks have lost money in recent years, despite their much larger audiences.)

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“The TV game is different now,� allows Cable World’s Ziegler. “It’s not about eyeballs. Instead it’s like the magazine business when it shifted from general circulation to specialty publications. You can now choose from six different golfing magazines instead of only one.� It comes as no surprise, then, that all-golf channels are now proposed, or that Time Warner is launching the Money Channel as a direct video descendant of its Money magazine.

“Demographics are what advertisers are really concerned about these days,� says Dick Beahrs, onetime president of the defunct Comedy Channel. “MTV doesn’t knock out the lights with its ratings, but its program costs are extremely low and it gets an audience (of 18-to-34-year-olds) that doesn’t watch cable much.� Translation: Advertisers will pay more to reach a particularly elusive category of viewers.

Besides entrenched broadcasters, increased channel capacity has inspired a motley band of entrepreneurs, celebrities and free spirits to become wanna-be cable network operators.

Rep. Edward J. Markey (D-Mass.), chairman of the House telecommunications subcommittee, has been asked to re-examine last year’s Cable Act because of what would-be cablecaster Jay Levin calls its alleged “chilling effect� on start-up programmers. Markey, chair of the House Telecommunications Subcommittee, announced last month that he expects to convene hearings on this and related topics.

Levin, owner of LA Weekly and backer of the Planet Central TV Network says, “The channel space is being eaten up by all the ‘I Love Lucy’ rerun stations, which is a real impediment to creative new services like ours. We’re still going to get on, but we’re further down in the pecking order.�

At the Discovery Network, Vice President Jim Boyle says officials are in the midst of an internal debate about how best to proceed with new services: “It’s unclear how much subscribers are willing to spend for, or how much they’ll be willing to watch, any additional channels.�

The Maryland-based company is experimenting with pay services that present highlights of the service’s most popular programming and with International versions of Discovery. Its next cable venture is Your Choice TV, a pay-per-view channel that allows viewers to order episodes of their favorite programs after they’ve aired on broadcast TV or cable. Testing began last year and will continue through most of 1994.

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Whether any of these cable services will still be around in two years is an open question. Deregulation and subsequent re-regulation of the industry “has really upset the apple cart,� sighs one independent cable program producer based in Hollywood. “As a result, politicking between program providers and multisystem cable operators is what matters the most now in determining what gets seen where. The actual content or worthiness of any given service is secondary.�

In the case of many recently announced channels, agrees Madison Avenue analyst Betsy Frank, “their primary reason for being is neither to fill the needs of advertisers nor to satisfy the demands of viewers, but rather to help broadcasters and cable companies deal with (their regulatory obligations). Therefore, the true marketplace value of these new cable services probably won’t be known for some time.�

But with even second-tier networks like Lifetime, Nickelodeon and Arts & Entertainment now worth $500 million or more, according to analyst Gerbrandt, cable’s newest players say the gamble is well worth the risk.

A Station-to-Station ‘Field of Dreams’

A Military Channel? The Recovery Network? These are just a few of the dozens of cable channels on the horizon:

AMERICANA--A mini-network to air on the existing Nostalgia Television, emanating from Branson, Mo., with live country music concert programming.

AMERICA’S TALKING--NBC’s new talk service, launch date and details unannounced.

BBC WORLD NEWS SERVICE--This British all-news channel has discussed a possible U.S. launch through the auspices of the Discovery Channel, but nothing definite has been decided.

THE BOOK NETWORK--Details are sketchy on this book lovers’ channel.

CATALOGUE CHANNEL--Yet another interactive home-shopping channel, this one backed by Spiegel and Time Warner, to launch early in 1994.

CNN INTERNATIONAL--A new version of CNN for news buffs, rolling out over the coming year.

THE CRIME CHANNEL--Feeding by satellite from Sherman Oaks starting in May, 1994, this is an entertainment service focusing on--you guessed it--crime stories.

THE FITNESS CHANNEL--Fitness videos from the people who brought you Value Vision and TV 23 in Providence, R.I.

THE FULL-SERVICE NETWORK--An experimental interactive (two-way) channel from Time Warner, launching in April, 1994.

FX--Backed by Fox Inc. and TCI, the nation’s largest cable firm, it promises general entertainment with special appeal to younger viewers. Scheduled to launch June 1.

FYI CONSUMER CHANNEL--A home-shopping network.

THE GAME SHOW CHANNEL--Round-the-clock game shows from Sony Entertainment/United Video; no launch date set.

THE GOLF CHANNEL--Arnold Palmer hosts programs for the golf enthusiast.

THE GOLF NETWORK--An exploratory venture from Ted Turner, not to be confused with Palmer’s project.

THE HISTORY TV NETWORK--The Arts & Entertainment Network has set a fall 1994 launch for this non-fiction service.

THE HISTORY CHANNEL--Owned by entrepreneur David Glick of Washington, D.C., details on the service are still sketchy.

THE HOME & GARDEN TV CHANNEL--Scripps Howard Broadcasting will go after millions of American homeowners with practical programming.

HORIZON TV--This new PBS channel launches late in 1994 with lectures, readings and symposiums.

THE HORROR CHANNEL--This tentatively titled network showing horror and monster movies is under consideration by Ted Turner’s organization.

THE ITV NETWORK--Interactive classified advertising (“electronic Yellow Pages�) launches in January, 1994.

THE JAZZ CHANNEL--From the folks in Washington who bring you BET: Black Entertainment Television, to launch in fall, 1994, with music videos and concerts targeting African Americans.

JONES COMPUTER NETWORK--A new computer instruction block on Mind Extension University, an existing low-profile service owned by Jones Intercable.

MBC MOVIE NETWORK--This new pay channel from the Minority Broadcasting Service offers African American-oriented movies, boxing and concerts.

THE MILITARY CHANNEL--Shoot-’em-ups from the Visitel Network of Louisville, Ky., launching in February, 1994.

THE MONEY NETWORK--This is the working title of a new service from Time Warner, with help from Time’s Money magazine, launching in early 1994.

THE MULTIMEDIA TALK CHANNEL--An all-talk network from entrepreneur Paul Fitzpatrick.

OVATION--A new fine arts network from Harold Moore, the Alexandria, Va., entrepreneur who developed the Learning Channel during the 1980s.

PLANET CENTRAL TV NETWORK--Environmental-themed programming spearheaded by LA Weekly owner Jay Levin, to launch in early 1995.

Q2--A new channel from home-shopping QVC, which is merging with Home Shopping Network and will possibly launch a new fifth broadcast network called BEST-TV.

THE RECOVERY NETWORK--A “wellness� service based in Milwaukee, with details under wraps.

ROMANCE CLASSICS--From Rainbow Programming, romantic movies and TV shows, including reruns of “Peyton Place,� launching on Valentine’s Day, 1994.

THE SEGA CHANNEL--Interactive games from the electronic games manufacturer of the same name.

SOAPS--A spin-off from Lifetime featuring serial dramas appealing to women, launching in 1994.

STYLE TV--Owned by Daniel Wolf and Diane Keaton: Launch date and programming are unknown.

THE TALK CHANNEL--Call-in shows backed by media consultant Ed Cooperstein.

TURNER CLASSIC MOVIES--Insiders expect Ted Turner to launch this service after he buys and folds American Movie Classics, operated by Cablevision.

TV MACY’S--A home-shopping channel being backed by the Macy’s department store chain.

WORLD AFRICAN NETWORK--A pay service with entertainment fare for African Americans, owned by Pervy Sutton’s Unity Broadcasting, to launch in June, 1994.

YOUR CHOICE TELEVISION--A-pay-per-view service of the Discovery Network offering replays of popular programming after their initial airings on the broadcast and cable networks. Still in testing stage.

Z MUSIC--This contemporary Christian music video service has recently launched.