Digital self-promotion

Movies, Internet, targeted programming-the force driving digital penetration depends on whom you ask

Movies drive digital cable penetration. No, Internet access through the TV set will drive digital penetration.

Au contraire, it's micro-targeted programming, so the cat-loving demo can watch all cats all the time.

When it comes to envisioning the driving force behind digital penetration, it all depends on whom you ask.

John Sie is a walking reservoir of statistics about how movies drive digital penetration. Sie is president and CEO of Encore Media Group, which has more than a dozen movie channels. His company banners outside the New Orleans Convention Center proclaimed, "STARZ ENCORE Super Pak Drives Full Digital Conversion!"

Sie was one of eight executives at NCTA's first general session, on May 7. CNN anchor Joie Chen moderated the seminar, entitled "Digi-Hear the Latest?" Ostensibly a panel to examine the opportunities presented in a digital cable environment, "Digi-Hear" became more of a pitchathon for panelists.

When asked what operators could do to drive digital penetration, Sie said: "Look at DBS. A Yankee Group study found 42% of people surveyed said they bought a satellite dish for the movies."

Sie went on to warn cable operators to ramp up their digital upgrades or eat DBS dust. DBS has approximately 14 million subscribers compared to next to none five or six years ago. Cable, in turn, has about 78 million subscribers with a little less than 4 million of that digital.

"Satellite is 100% digital. Cable is about 5% digital," Sie noted. "In the next five years, for cable to maintain its subscriber base, it will need to grow 1.5 digital subs for every DBS sub."

Whomever Sie can't bring in with movies, Johnathan Rodgers will go after with narrowly targeted niche channels. Rodgers is the president of Discovery Networks, which has already sliced its own content pie into animals, travel, science, kids, airplanes and health. Rodgers made no bones about where he was coming from.

"Our belief is that we target the family from birth until death," he said. "It's to our advantage to get as many digital boxes out there [as possible]."

So it is for Larry Wangberg.

Wangberg is chairman and CEO of ZDTV, television for computer geeks, techie neophytes and curious onlookers.

Wangberg's schtick is that 50% of those watching in his 18 million-household universe also have their computers on. Hence the melding of the media, the confluence for which ZDTV programs.

The reality is that digital boxes are going out faster than some MSOs can deliver them. Collectively, the cable industry is hooking up several thousand households per day.

For digital, the snorting and circling is over. The bull is charging. Sie, Rodgers and Wangberg know that, if they don't get their content in the queue now, the competition for digital carriage will soon become as bloody as it is for analog today.

Said one major operator, "All the pods are full. I'm struggling to find a place for ... networks now."

Yet the race is not merely to the video. The interactive guys are fixing to bolt from the gate. Bill Samuels is chairman and CEO of ACTV.

"We believe that in five years, digital television will be as hot as the Internet if it focuses on dramatically improving TV and advertising," he said. Samuels' solution is ACTV's specialty: microscopically targeted, or one-way, "individualized TV."

Hal Krisbergh's pitch is the impulse click. Krisbergh is chairman and CEO of WorldGate Communications. WorldGate makes the patented Internet hyperlink that works through digital cable boxes. The hyperlinks are primarily tied to ads, for which each click can generate 30 to 40 cents. For cable households, where the TV is on an average of eight hours a day (in Krisbergh's estimation), a couple of daily clicks can mount up to $20-plus in incremental revenue per sub per month.

Incremental revenue is the war cry in cable these days, when even the smallest rate hike incites people to take up writing utensils and excoriate cable operators in letters to editors.

People will only pay so much for additional channels, but they will shell out a few bucks for convenience. That's where David Zucker comes in. Zucker is president and CEO of DIVA Systems Corp., purveyor of video-on-demand delivery.

"Twelve to fourteen dollars in incremental revenue per sub per month can pay for video-on-demand in one year," he said. "We've had over 300,000 buys in the field already."

Even the guide guys are fighting to secure a stronghold in the digital landscape. Peter Boylan is president and COO of TV Guide Inc. Stephen Palley is CEO of Source Media Inc. Both are in the business of program guides. TV Guide, the incumbent, is taking the platform-agnostic route, adapting its electronic program guides to any and all video delivery technology. Source, the challenger, is server based and can therefore be tailored on the local level.

Electronic program guides will eventually be the portals to T(for television)-commerce, as long as they're easy to use, Boylan predicted. "The IPG sweet spot is the impulse aspect," as long as they "keep it simple, stupid."

As far as driving digital penetration, an AT & T Broadband spokeswoman said the answer lies not in a single service, but in all of them. AT & T Broadband has approximately 1.9 million digital subscribers, the most of any MSO.

"It's choice. Choice of everything. Choice of premium multiplexes, to a quality niche interest channel."