Cablevision Systems' much-criticized start-up direct broadcast satellite (DBS) service is aiming squarely at high-def junkies, loading up every HDTV service it can get its hands on plus creating a slate of new — though very narrow-interest — ones on its own.
Cablevision executives are working to secure Sears as the service's initial retail outlet, sources working with the company said. Cablevision executives have told prospective business partners that Sears has committed to sell the service and receivers through the electronics department of about 860 full-line stores.
One Wall Street executive familiar with the plan said that Cablevision is tapping Motorola to supply satellite receivers and dishes. Motorola's broadband division is the top supplier of cable set-top converters (which consumers currently can be obtained only through cable operators) and cable modems (which are sold widely at retail).
Cablevision declined to discuss its DBS plan, saying it expected to unveil them within the next few weeks. A Sears spokesman could not be reached at deadline and a Motorola spokesman declined comment.
Cablevision chairman Charles Dolan has been secretive, keeping many of his own executives in the dark about the programming and marketing details, which he is tentatively planning to reveal on Oct. 1. Cablevision's DBS license from the Federal Communications Commission mandates that it light up some sort of service by year-end.
But some media and equipment-manufacturing executives have been briefed on plans for the service, whose working name is Rainbow 1, though a real brand name is in the works.
According to those sources, the company projects that it will sign up 30,000 subscribers by year-end; 150,000 by the end of 2004; 500,000 in 2005 and 1 million in 2006.
The service is designed as a direct replacement of cable, DirecTV or Dish Network. The service aims at the high end of the TV market, the two million current owners of high-definition TV sets. Rainbow 1 seeks to secure rights to every HD channel available, from HBO to startup HDNet.
But Cablevision is still negotiating to lock down deals with programmers. As a top 10 distributor of multichannel programming serving three million metro New York customers, Cablevision is an important customer to cable networks. But some infrequently get an opportunity for leverage over cable operators, so some are using Rainbow 1 to seek better carriage terms by Cablevision's systems.
"They may announce a package with us in it, but that doesn't mean we have a deal," said an executive with one cable network.
The bulk of the HD channels available will be home-grown services targeting narrow niches. The executives say they'll be similar to the product on Cablevision's Mag Rack video-on-demand service, which patterns itself after small, enthusiast magazines. Mag Rack channels include "Photography Close Up" and "Celebrating Dogs".
At least initially, there will be no local broadcast signals available on the Rainbow 1 service, so subscribers would have to rely on cable or over-the-air reception to get ABC's Monday Night Football, for example. The satellite receiver is to come with a separate antenna to pick up broadcast signals.
The base package would be $49.95. Subscribers would get one slate of 21 HD channels, but those are the "Rainbow exclusive" services. They would also get another slate of conventional, standard-definition cable services like A&E, MTV or Lifetime.
Subscribers would then get to choose one of six premium packages. One of them is dubbed "HD Marquee", envisioned as a lineup of core HD channels, like HDNet, Discovery HD Theater, ESPN HD, A&E HD and Bravo HD.
A second tier would be sports, a blend of high-definition services like the NBA TV's HD service, plus smaller services like ESPN News and Fox Sports product.
The remaining four packages would be movie channels, for example, all of HBO's various feeds including its HD service, or a similar lineup from Showtime, Starz or Cinemax.
"Everything is sprinkled with HD," said an executive at one cable network that has been briefed on Rainbow 1's plans. "That's [Dolan's] point of differentiation."
Details of the equipment deals, such as retail pricing, subsidies and commissions to retailers could not be learned. However, one industry executive said that the location of the Rainbow 1 satellite will require West Coast subscribers to use a larger dish to receive signals, than other sections of the country, and some sectors may not receive the signal at all.
John Higgins is deputy editor of Broadcasting & Cable Magazine, a property of Reed Business Information and a sister publication of TWICE.