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Voom Looks at Big Price Cuts

2/08/2004 07:00:00 PM Eastern

After a dose of growing pains, startup high-def DBS service Voom is set to rework its prices and launch a more serious marketing campaign. Quietly, the Cablevision Systems subsidiary has been testing several new pricing and packaging proposals.

One cuts its high, $750 equipment price to $399. Another offers a $500 rebate to anyone buying a Voom receiver and a new HD set, cutting the entry price for the service to just $249. The service also charges a monthly subscription fee.

The pricing change is just one element of Voom's effort to get fully on its feet. The company ran into big snags in hooking new customers, largely because antenna installers have found the digital signals of TV stations surprisingly spotty. Set-top boxes weren't assigning the proper channel numbers to networks. Although Voom has signed deals with cable networks Starz and Playboy, its channel lineup is missing important programmers, notably HBO and ESPN. A push by exclusive retailer Sears fizzled, partly because Voom had problems hooking up the store's electronics department.

But Voom executives aren't particularly rattled, saying the snags are the kinds of problems that emerge in rolling out anything as ambitious as a national TV service. Bill Casamo, executive vice president of Rainbow DBS, called it "typical startup stuff." What's important to him is the reaction of subscribers. "When we get things right, which is not always, consumers love it. There is an unfulfilled demand for HD television."

Indeed, HD junkies have been generally positive. At the AVS Forum, the Internet's home to most hardcore and often cranky videophiles, Voom gets generally good marks for its service, being criticized mostly for its high price and missing programming.

Cablevision Chairman Chuck Dolan is positioning Voom as a high-end HD-centric service, planning to offer as many HD channels as cable networks put on the air. DBS services currently have little capacity to carry much bandwidth-hungry high-def product, and little even exists. Voom has also created 21 homegrown HD services, loaded with low-cost but sharp-looking programs and movies.

Wall Street hates the huge, $2 billion risk Dolan is taking by launching Voom, so Cablevision plans to spin it off into a separate company, where it will be joined by Cablevision's Rainbow entertainment networks, including AMC and IFC. But that spinoff is being delayed by a Securities and Exchange Commission inquiry into Rainbow's accounting practices.

"[Voom's] not getting huge promotion," Richard Greenfield, media analyst for Fulcrum Capital. "They still don't have their two most important programming deals. There's not a lot of visibility of where it's going."

Casamo would not even hint at how many subscribers Voom has signed up. After it launched in October, Voom executives had planned to spend several months in a shakedown cruise. Subscribers had to buy a $750 receiver and dish to get the service but won't be charged a monthly fee until March.

But the most significant problems are being resolved. The good news is, there are no problems with Voom's one and only satellite, launched last July. Set-top-box glitches should be resolved as Voom beams updated software into the receivers.

Installations are getting easier. Initially, it took contractors four hours to hook a customer up. Installing rooftop dishes and wiring the house was the easy part. The hard part involved local broadcast stations. Because Voom lacks the capacity to retransmit even the low-bandwidth analog signals of local stations, installers mount antennas to get broadcasters' over-the-air signals.

But many TV stations aren't broadcasting at full power and are impossible to receive. Voom executives spot-tested digital reception in several major markets with success. But in real-world installations, homes in markets with an average of three TV stations broadcasting in digital can receive only two of them.

Part of the problem, Casamo said, is that Voom's first customers skew to rural markets. However, "broadcasters need to go full-power. Most of them are not operating at full power all the time. It limits their reach."

Voom installers are working with new types of over-the-air antennas, which is helping. "With every install we're doing," he said, "we are learning more and more how to do it."

March