Here’s everything you need to know about how to get a carriage deal with Comcast…step by step from Amy Banse and Matt Bond. By Shirley Brady While the 500-channel universe is fast becoming a reality, start-up digital networks are discovering that there isn’t much room at the inn. Even if these diginets manage to snag a berth, it’s often small, uncomfortable and on the worst side of the hotel—not much room to grow, let alone turn a profit. That’s why Lynne Buening, a veteran programming consultant who advises new networks, jokes that she spends as much time talking people out of trying to launch networks as she does trying to help them. "The large networks have all the horsepower and research to really assess the marketplace effectively," she says of start-ups such as Logo, the gay-and-lesbian-oriented channel from Viacom’s MTV Networks that’s launching in February. "The smaller start-ups really don’t understand the scope of it, and how much it’s going to cost, no matter how great the idea." "The majority of networks out there have no chance at all," agrees Cathy Rasenberger, another start-up network consultant who’s had clients abandon the launch race because they ran out of funding. "That doesn’t mean there isn’t opportunity for some new networks. The eye of the needle has become a lot a smaller, but if you’ve got a really refined piece of thread you can still get through. You have to match up with the cable operators’ objectives—and even if you do, you still may not have an opportunity." By virtue of its size, Comcast has become the diginets’ kingmaker, with the power to make or break a digital network. Without a carriage commitment from Comcast, it is difficult for start-ups to raise the investment capital they need. That’s "at least $3 million, but more like $5 million" to get them started on the road to $100 million with "very deep pockets of their own," estimates Rasenberger. Comcast’s Nonlinear Counter-Pitch So what is Comcast looking for in a new digital network? The simple answer is, they’re not looking. But they will listen. And occasionally, they’ll even bite. While the company is open to networks that would shore up its multicultural and sports digital tiers, they’re really hoping that new programmers seeking linear launches will switch to the video-on-demand route and instead launch a nonlinear channel. That news could dash any aspiring network executive’s dreams, but Comcast’s EVP of programming Matt Bond and EVP of programming investments Amy Banse are leavening that tough-love message with a genuine enthusiasm (and a willingness to pay) for what they see as the future of television. Aspirants headed to Comcast’s headquarters in Philadelphia to pitch linear concepts where they’re hoping the MSO will take a stake, should be prepared to hear Banse’s standard preliminary comment: "I will tell you right off the bat that our focus to some extent has shifted to potential virtual VOD networks." Banse listens politely to what they have to offer at pitch meetings. "And then I tell them, `It’s next to impossible, if not impossible, to launch a linear channel these days.’" One reason is simple: capacity constraints. Distributors just don’t have the capacity to launch many more 24/7 channels. "That may be a limited constraint only; as our systems move to completely digital, capacity may open up. So it may be a short-term two-to-three-year constraint, but for now, it’s definitely there." With cable operators and satellite distributors showing more focus on preserving their margins and posting gaudy growth rates, nobody is demonstrating much of an interest in actually paying for new programming. "There’s an attitude out there—at least in the linear world—that with all of us offering 200-plus channels, there’s plenty of content out there, and the subscriber simply doesn’t want anything else to warrant charging them for that. So between those two facts, it makes it very difficult to launch anything, because it’s tough to get eyeballs. And if you get launches, it’s tough to get paid for it." That’s not to say that there are no linear rooms available at the Comcast Hotel. "But those linear opportunities are limited, and so I introduce people who come in to pitch to the VOD world," she notes. "I try to impress on them how extraordinarily excited we are by the prospect of VOD content." "It’s always been difficult for a start-up network to gain distribution, and even before digital there were always channel capacity constraints," says Bond of the hurdles to a linear commitment. "Since the launch of digital, initially the channel capacity constraints were somewhat ameliorated, but there was still an economic restraint: that the programming cost of these channels added cost to the programming line without necessarily adding cash flow to the bottom line. More and more of these economic and bandwidth issues really do make it difficult for new digital networks." Hence, Comcast’s enthusiasm for VOD. "We think that’s an exciting new product that in many ways is a superior new platform for niche or small market programming concepts," he says. "In a VOD world we might be more apt to distribute programming with more of a niche orientation because we don’t have to dedicate the same resources to it." The Value of Exclusive Content Steering new channels to VOD, Bond and Banse argue, helps start-ups avoid the crushing costs of programming and operating a 24/7 service by instead producing a virtual channel with fewer hours of content. If Comcast decides to carry that new content, and it’s exclusive to VOD, they will—as Banse announced at the NCTA National Show last month—pay for it. "If your channel idea doesn’t warrant a linear network but would work really well as a VOD network or construct," says Bond, "if you’re bringing [that] product to Comcast and you’re a new market entrant, you’re going to have to get paid for that somehow, whether it be via advertising or potentially in some kind of economic in the amount of money that we might pay for that programming." While echoing other operators in its vow to not pay for repurposed linear programming or library content, Comcast’s model for how they will pay VOD-only programmers still is taking shape. "This is really all in its infancy right now, and it’s all beginning to be developed," Bond says. "Server capacity by and large will continue to increase over time, and it will probably need content that fills it. The amount of resources that we’re using is scaled to the popularity of the programming that we have. VOD in a lot of ways presents a more attractive model both for us and for the programmer, because for a programmer to develop a 24-hour channel is expensive, and they have to lease satellite time." But all ye diginets who seek Comcast, don’t abandon linear hope. "We’re not saying there’s no room in this new world for a linear channel, because that is still an important programming construct and one that customers are still using way more than they’re using VOD," says Bond. As Comcast’s—and cable’s—top programming gatekeeper, he is naturally picky when assessing new digital networks hell-bent on linear. The Line on New Linear Nets Both Bond and Banse have specific criteria they apply to the huge amount of new network pitches they receive. "I look at the size and type of the target audience and its attractiveness to advertisers," Bond says of his checklist for new linear nets. "I look at the type of programming, and will it be compelling. Even if it’s something that’s of interest to a large target audience, that doesn’t mean that it will make good television programming. Everybody in America wears socks, but no one wants to see the Sock Channel. You also look at the other content that’s out there that’s also serving this niche or audience. And then finally there’s the economic aspect, how expensive is this product or channel." Banse’s criteria for weighing up and investing in proposed digital networks is just as tough. "You really need to meet four very specific criteria, which frankly are the criteria we have looked for in the past in deciding to invest in things like TechTV, G4 and Golf Channel," she says. "It needs to be unique to the channel lineup; it needs to be inexpensive to program; it needs to appeal to a specific demographic; and preferably that’s a younger demographic, because it needs to make its money on advertising revenue as opposed to relying heavily on affiliate revenue. If you can meet those criteria, then you may be something that we’re interested in looking at." Of course, every start-up digital network says it’s serving a great untapped audience, which gives it the power to reduce churn and drive digital penetration. "In an environment with hundreds of channels or dozens of channels, it’s hard for any one channel to demonstrate that it materially impacts churn," Bond counters. "It’s not impossible, but the hurdle is higher. But if you’ve got a channel that’s serving an important target audience that’s underserved, certainly that channel can be valuable and an important part of the cable offering." That’s what drove Comcast, spurred by Banse, to launch and invest in such recent start-ups as TV One and G4, which is now merging with older diginet TechTV. "We, the programming investment group, have to sell our content into Matt just like everybody does," says Banse. "If somebody comes in with a concept that we’re interested in, we’ll take a look at it and develop a model, and if it’s something that we want to invest in, we will pitch our case to him and see if it’s something that he’s interested in carrying. And if it’s something that we’re not interested in investing in, we encourage people to go to Matt on their own." "It’s not a surprise that things that we think are important new product opportunities just vis-a-vis our own cable customers would also be something that we would think is something we would like to invest in," says Bond. "TV One targets the African-American and urban audience, and that’s obviously a very important and significant and substantial market, while G4 is serving the youth culture from the gaming perspective. And then what we’re doing on Hispanic and international is another opportunity that’s well defined and an important market opportunity we’re pursuing." Besides Comcast’s CableLatino tier and its ethnic-oriented services in relevant markets, Bond also has been looking for content to fill the company’s current expansion into sports tiers. For instance, Comcast’s new sports tier in its Atlantic division has become the U.S. launchpad for GolTV, a soccer-based network that targets Hispanics but is available in Spanish and English. "Satellite providers have launched sports tiers and a number of other cable operators have launched them," Bond says. "It appears to be a niche that, while not universally desirable—in that only a percentage of your customers sign up for it—there is a percentage of customers who want this content and are willing to pay for it on a tier basis. So we’re going to try to meet that need." It helps if a programmer has the flexibility to provide unique content across platforms. "We’re delivering to the customer a high-speed data offering, a high-definition offering, a video offering and a video-on-demand offering," Bond notes, adding that interactive is also increasingly important. "If you hit each of those elements there’s going to be higher value to the concept than if you’re only hitting one of those elements." Bond says there are many ways in which a channel concept doesn’t make the grade. "It could have a diffuse programming objective. It could have a great idea, but programming to the segment is too expensive. Or maybe there’s a lot of interest in the subject matter but it’s difficult to make good television out of it. But there are always surprises, and concepts that succeed that you would not have predicted would succeed as well as they have." Even with digital space at a premium on its systems, Comcast’s programming gatekeepers keep such surprises in mind, and keep looking at digital networks in the hope the next great television idea will meet them in Philly—and wow them.