By Shirley Brady and Janet Stilson for CableWorld Magazine (4/16/07) For an idea of how content is evolving in the cable universe, look no further than the new carriage agreement between Time Warner Cable and Disney/ESPN.

Their multiyear deal, announced earlier this month, includes 15 linear networks (10 nets plus five HD versions), PPV (ESPN), VOD (Disney Channel), retransmission consent (ABC broadcast stations) plus Disney and ESPN content for a pair of Time Warner Cable’s cutting-edge video services: its Start Over network DVR product and Quick Clips, the operator’s broadband-on-TV test. Not mentioned (but as they say, stay tuned): content such as short clips that would augment Time Warner’s wireless and online products.

The deal symbolizes the overwhelming array of choices for consumers and cable operators. As 27-year cable veteran Patty McCaskill recalls, systems used to be hard-pressed to fill just a handful of channels. Today, the SVP of programming at Suddenlink jokes that her biggest challenge is "not owning a crystal ball" to see where the multi-platform mania and changing viewing patterns are headed.

For this first part of our three-part survey of cable’s content gatekeepers, we spoke with cable operator programming executives about how they are trying to address tomorrow’s content needs today, from better navigation (much needed) to linear launches (forget it) and rising costs (don’t ask). Joining McCaskill in this virtual roundtable:

Cathy Fogler and Greg Rigdon, who took the programming reins at Charter Communications’ after EVP Sue Ann Hamilton left last year. Their shared challenge: repackaging Charter’s video lineups and reclaiming bandwidth.

Jeff Abbas, president and CEO of the National Cable Television Cooperative, whose small and independent operators need unique video product at a time when margins on core video are shrinking.

Rob Jacobson, president and CEO of the iN DEMAND MSO-owned programming consortium, who was thrust into the public eye last month when Major League Baseball and DirecTV crafted a deal that aimed to cut cable out of Extra Innings for seven years. —Shirley Brady

HD and VOD Content Top Charter’s Shopping List

Last December, Charter Communications looked within its ranks to identify someone to lead its content services. It came up with two executives. Cathy Fogler, who joined the company last August as VP of video product management, took on a more elaborate title: VP of video programming and product management. Making the programming decisions with her is Greg Rigdon, who joined Charter about a year and a half ago as SVP of business development. While his title remains the same, Rigdon now sits at the negotiating table to hammer out deals with programmers that Fogler has vetted. Fogler and Rigdon, in one of their first interviews since taking on their new responsibilities, discussed Charter’s content acquisition strategy with CableWorld contributing editor Janet Stilson.

Overall Content Strategy

Rigdon and Fogler are focusing on building value by excluding channels that are of minimal interest and repackaging networks in ways that are more responsive to the interests of customers.

The process of redefining the packages began before the duo took on their new roles, but Fogler was instrumental in devising it. Her decisions have been based on feedback from CSRs, the billing department and customers.

As for Rigdon: "I’m working hand in hand with Cathy — looking to reclaim bandwidth and build out our high-definition and video-on-demand offerings."

Fogler reiterates that adding more high-definition and on-demand programming will remain top strategic goals. "We’re looking at that in the context of all of our product offerings in the triple-play bundle."

Bullish on HD for Revenue Growth

Fogler is gung ho about the revenue potential of HDTV content. "My good friend Bruce Leichtman [of Leichtman Research Group] put out a research study late last year [which showed that] over one in every six U.S. households now have at least one HD television set, and 26% of HDTV owners have more than one set," she notes. "So [in terms of] a value proposition to our customer, we’re enthusiastic about the opportunity that HDTV provides for more content value and choice to our digital customers."

Rigdon is particularly keen on prospects for video on demand. "You can argue that VOD is in its infancy. As digital penetration increases and awareness of VOD increases — and as we improve the navigation and the offering — we think that’s a great opportunity for growth as well," he says. (Fogler and Rigdon declined to cite specific dollar figures when discussing revenue projections for HD and VOD content.)

Improvements in Content Navigation

Fogler says she and Rigdon are looking at ways to work with the company’s program-guide partners to optimize the experience for consumers.

"One recent change that we made was a content category restructure for on demand," Fogler says. "Based on a research study that was conducted with our customers, we changed the categories to be a bit more intuitive for our customers to select on-demand product. [The content selection process is evolving] from more generic titles to more genre-based options, so that it allows for a much quicker sort of the on-demand content. It allows them to get what they want more quickly."

Focus on HD, VOD — Less Hope for Linear

Rigdon and Fogler say they are open to linear launches, but they’re not taking chances. "If there is compelling content that we feel there’s real consumer demand for and that improves our offering, [we’ll consider it]," says Rigdon. "We will continue to meet with existing networks that have new offerings or new start-ups that have offerings."

"Our focus is on HD and on-demand content," says Fogler. "We will consider — consider — linear programming on a case-by-case basis, as Greg mentioned, based on the value and choice that it provides to our customers."

Rigdon downplays retransmission consent and the leverage broadcasters are exerting as a threat to Charter’s programming goals. "There are lots of ways to deal with that issue," he says, without providing specifics.

He sees the main challenge for Charter on content being the same as it is for all multichannel providers. "It’s keeping up with consumer demand and making sure you have the offering to provide [consumers] with the choice at the price points they want. That’s what we’re focused on," Rigdon says.

Retooling the Packages

Fogler notes that over the last several months, Charter president and CEO Neil Smit has spoken extensively about the company’s need to repackage programming. Charter started that repackaging process in the fourth quarter of 2006, and the work won’t end for several months.

"The opportunity with the repackaging is to take a look at the way our digital packages are currently offered to our customers and understand where we can optimize that offering from a customer-value perspective as well as adding in HD and on demand," Fogler says. "[It’s about how to] make that a valuable offering to our customer and also simplify the packaging strategy so it partners well with our high-speed Internet product and our telephone product. That will allow us to streamline the sales process for our triple-play bundle."

Previously, Charter offered three packages: "Big," "Bigger" and "Biggest." Now customers start with a basic tier and are able to check off certain options online or over the phone with a CSR, such as "I want more sports programming," or "I want more movies," so they’re able to build a personalized package. If customers start with a triple-play option, they’re also able to add to the channel lineup in the same way — and assess how that changes the monthly costs.

The Subscriber Drop

Rigdon says he’s unconcerned by the loss of 43,000 basic subscribers that Charter experienced in the fourth quarter of 2006 versus the third quarter.

"It’s a small drop, and we’re not concerned about it," he says. "We’ve got folks on that issue, and we’re addressing it, and I think that will bear out."

Sticking to the Budget

Rigdon says Charter is watching its programming costs by being extremely picky. "We’re being careful in what it is that we’re selecting," he says. "And we’re applying the criteria of how it impacts consumer choice and value. And we’re also working with our programmers to get the right value exchanges to meet our needs."

Bandwidth Concerns

Reclaiming bandwidth ranks high on Rigdon’s priority list. That way, "we can deliver the most robust high-demand offerings" to meet the interests of consumers.

Charter’s bandwidth effort, as well as the work of other MSOs, will be explored further in part II of our Gatekeepers series in the June 18 issue. —Janet Stilson

Suddenlink’s Law of the Jungle: Survival of the Fittest Content

Having ingested systems from Charter and Cox, privately held Suddenlink is expanding its telephony footprint, beefing up its video-on-demand content and reassessing linear analog and digital video programming. Among the recent changes: It signed a deal to broadcast 145 Cincinnati Reds baseball games this season in its West Virginia-based local origination channel but took a pass on offering MASN to Baltimore Orioles fans in Southwest Virginia since the RSN was demanding two channel slots.

Suddenlink SVP of programming Patty McCaskill is tough-minded when it comes to delivering content that she thinks will work for her customers and improve her company’s bottom line. As the executive who oversees and negotiates programming agreements that touch Suddenlink’s 2.5 million subscribers, she’s obliged to separate the wheat from the chaff.

Carriage Criteria: Unique Content, No Filler

McCaskill’s No. 1 priority is that content on any platform be unique and relevant to subscribers. "If somebody’s coming in and pitching new content, whether it’s for a linear channel or high definition or for digital or for video on demand, we look at what the content is and whether it’s differentiated from everything else that we’re carrying," she says. "There are lots of me-too networks out there."

With viewing patterns changing because of DVRs and on demand, it’s more critical than ever that linear networks reflect their programming mission throughout the day, with no repeats, infomercials or retailing filling up the schedule.

Whether she’s looking at Suddenlink’s analog, linear, VOD or HD lineups, McCaskill says she needs "to be very cautious [that] we’re looking at quality, not just tonnage, and building into our agreements the rights to discontinue content that is not performing." If not, "We need to replace it with content that does perform."

It’s not just about Nielsen success, says McCaskill. "It’s about keeping a balance: Some content may not perform with high ratings but may serve a unique niche or demographic within our systems, so it becomes important for us to offer that unique voice."

Wanted: Unique Content at an Affordable Price

When deciding whether to carry a network, McCaskill says she likes to see a clear road map that shows where the network is headed and how it’ll get there. "No new network on day one is going to have 100% of what their programming will look like when they mature," she says. "It takes time to create that original programming and get it in the can and find out what works and doesn’t work. But if you wait until everybody’s mature, you’ll never bring new voices to the consumer."

McCaskill’s biggest challenge is managing the spiraling cost of content. "In every contract negotiation the goal is to try to control the programming costs," she says. "Retransmission consent keeps all of us awake at nights, and that certainly can impact programming costs. Every time contracts come up for renewal we look at the programming and see if it’s still delivering value for our customers. If a programming network is not delivering value but is creating expense, then it may be that we are no longer going to carry them."

In short: "It’s like a grocery store. Does everything really deserve that shelf space?"

Multi-Platform Planning for an Uncertain Future

McCaskill doesn’t think anyone really knows what viewing trends will look like five to 10 years from now. "We haven’t got a clue," she says. "Things are moving so much faster in this industry with content and technology over the last 12 to 18 months than it probably changed in the last 27 years I’ve been in the industry.

"What’s critical is that we make sure we have compelling content to deliver on all platforms via the excellent pipe that we’ve got," she continues. "We have the facilities to get content to consumers wherever they want to view it. So if we do that, and if we do it effectively, they’re going to want to watch content on different screens in different parts of the day, [and] I think we’re going to win."

Financial success in this changing world of video will derive from "aggregating revenues from all the platforms," she adds. "If we get tied up in today’s model, and don’t keep our minds open and look at the technology and let consumers lead us where they’re going, we’re going to lose."

Consumers are still figuring out what they want, and how they want to get it, McCaskill says. "They will want to watch certain things on a big screen, high-definition television set," she notes. "There will be other things they’re perfectly happy watching on an iPod, on broadband or on a cell phone. Our role is to be the facilitator for our customers."

The explosion of Web video, while great for creating complementary content that works on different cable platforms, may be a double-edged opportunity for Suddenlink’s programming partners. The danger for content providers: If they don’t remain relevant on linear, their Web-based original content could become more interesting to consumers than the established TV brands, McCaskill says.

Linear Launches Seem Finished

Like all operators, McCaskill says the chances of launching a linear network are minimal. "[Already, my customers are] not watching scheduled programming so much. In an on-demand world, nonlinear is where things are going," she says. "With VOD, DVRs and broadband out there and all the new models for advertising in that content, coupled with the need for utilizing our bandwidth for advanced services, the chances of a new concept being so compelling as to warrant linear carriage are slim."

Navigating the Video Explosion

Like other MSOs, Suddenlink has been grouping digital networks into neighborhoods by genre (kids, sports, news, for example), something McCaskill says "needs to happen more in our analog lineup."

She’s also "looking at the navigational tools and guides that are out there. They’re not nearly where they need to be…we’re going to need to find that magic navigator." She’s watching companies in the navigation space such as TV Guide, Microsoft and Hillcrest Labs, but says bigger MSOs "have the internal resources and R&D to [develop] more than those of us that are not of such scale and mass." —Shirley Brady

NCTC Copes With the Rising Cost of Its No. 1 Grocery Staple

The National Cable Television Cooperative, or Cable TV Coop, as it’s better known, is a nonprofit buying consortium that negotiates volume discounts on programming master contracts (among other deals). Its 1,100 member companies choose to participate or they can strike their own deals with programmers. NCTC members primarily operate in rural and suburban communities, ranging from member companies serving fewer than 100 subscribers to operators such as Suddenlink, Insight, Mediacom, Cable One and WOW, which serve more than 1 million subs.

NCTC members operate more than half the franchised cable systems in the U.S., so, as president and CEO Jeff Abbas points out, "We look like one of the larger MSOs on an aggregated basis." But NCTC doesn’t enjoy the cost-saving benefits of being a big MSO, he adds; its members typically pay a premium for the same content lineups offered by bigger operators (and the competition).

"We’re looking to get all the rights [on content] that our members are looking to put into the marketplace," says Abbas, adding that NCTC seeks to strike deals with "MSO-level pricing, MSO-level flexibility, MSO types of ancillary rights for the core video channels and really have a content acquisition strategy that looks the same as the large MSOs.

"If you haven’t got the top 30, 40, 60 channels…then you’re not competitive," he says of members’ bare minimum content goals. "On a video delivery basis you want to be keeping up with the Joneses." With Verizon’s FiOS and AT&T’s U-verse primarily launching in urban markets, the Joneses tend to be the satellite companies. "Most of our guys look at DirecTV and EchoStar and try to answer the question, ’What does it take for me to have a competitive video offering in my marketplace?’" he notes. "In a lot of respects that can be a me-too video offering."

The Top Challenge: Cost

As with all cable operators, NCTC’s biggest content acquisition challenge boils down to cost. "Certainly for the size we bring we pay a premium for a lot of channels," Abbas says. "That puts added margin pressure on our core video offerings. The profitability of core video is being squeezed out of [NCTC members’] video systems, and core video is starting to look more and more like a staple in a grocery store, like milk."

As Abbas puts it, core video is "something you have to offer, even if you don’t make money on it." So he fights hard on behalf of his members. The Coop has more than 150 programming master agreements (of which 10-15 typically expire each year), and is currently engaged in "baseball-style" arbitration with Fox for its regional sports networks. An arbiter will choose Fox’s contract proposal or NCTC’s — no mix and match of terms — in a situation that NCTC says could drag into the summer.

NCTC is not afraid to drop linear channels that aren’t performing or adding value; Abbas notes a considerable amount of yearly "slippage" as members decline to pick up certain networks when programming deals are renewed. NCTC members will reap cost-saving benefits as video moves to broadband and mobile platforms, he believes.

Emphasis on Connectivity Rather Than Content

Abbas says he’s implementing a strategy where cable’s pipe gets shifted toward zero-cost content items, such as subscriber- or consumer-supplied content. Mobile delivery services, for instance, can be used to enhance operators’ relationships with subscribers. "We don’t have to pay people to come up with the conversation they want to have with their neighbor or their mother-in-law or their kids off in college," Abbas says. "They supply that content and we just convert it into ones and zeroes and shove it over our network. So our content cost and profit and loss is zero for that. That’s a beautiful thing."

The same goes for the value of broadband connections. "We sell connectivity, and we don’t sell any meaningful component of content for the high-speed data type of offering," he notes. Subscribers "provide their own content [and] get from the Internet the content that they want, and our cost for that is zero."

Biggest Potential Revenue-Booster: Broadband Video

With core linear video shrinking as a profit center and linear video itself migrating to the Web (and vice versa), Abbas says the biggest upside for NCTC members "still is with continued penetration of broadband" and pushing the triple-play bundles containing content of all flavors. "We have a rapidly growing footprint where VoIP is deployed, so [we’re] gaining both breadth of distribution and depth of penetration," he says. "Between the second and third pieces of the triple play, that’s where all the money is right now.

Changing Content Value: Be on All Pipes

NCTC is happy to ride the wave of mobile and broadband content as long as it gets a piece of the action. "We don’t care that much if the value of linear video shifts to a broadband pipe or to a wireless cell phone pipe, as long as we’re in all those spaces and we get our share of each of those pipes."

Content Guides: Let Big Ops Show the Way

Abbas is "aware of the concern" over new forms of navigation.

"That’s one of those areas where I think it’s more beneficial for us as a group to be a fast follower, rather than being a leader," he notes. "We have almost 7,000 cable systems in our portfolio. To try to design a guide for that would be a pretty monumental undertaking. I’m relatively OK with the major players who’ve got the infrastructure to work with the guide companies to design new guides and products."

Message to New Channels: Skip Linear

Abbas doesn’t think it makes much sense to launch — or, from his point of view, carry — new linear networks, particularly with so much advertising migrating online.

"How do you aggregate enough viewership, enough interest, to command additional revenue streams from advertising?" he says. "The 400th channel really belongs on the Internet. Some linear channels may be born and other linear channels may die, but that’s OK because the content, if it has value, is still going to be found by consumers. We don’t care which pipe it goes over. We just don’t want to pay for the content."

New Vids on the Block

Online video is of particular interest to Abbas, personally and professionally. "I will watch some of the videos that appear on YouTube on almost a daily basis just to try to keep familiar with what’s going on," he says.

Could he see NCTC someday striking a programming agreement with a YouTube or other Web-only content play? "Sure. We have rights like that in some of our [deals with] large linear channel network groups. [And] every now and then we’ll [get a call from a nonlinear programmer] looking to explore a relationship like that."

Outmaneuvering the Competition

"There’s a much more local flavor and local component to the offerings that our guys have, and the whole management that they can bring to delivery of service," says Abbas, who touts his members’ "hyperlocal" advantage. "Yes, we need the national offerings that compete with the national DBS providers, yes, we need a triple-play offering and even a quad-play offering, but to the extent that there is local responsiveness and an opportunity to execute against localized interests, our guys own that space, and their distribution strategies reflect it."

Getting Ready for Battle Against the Telcos

NCTC members have done "a lot of rebuilding" over the past four years, with 70% of its membership now operating a 750 MHz plant. "We have pretty robust bandwidth virtually everywhere, but the intensity of the new competitive entrants just hasn’t happened to our guys as yet. The big new telco entrants [FiOS and U-verse] are in major markets, so we’ve got a couple of years to battle-harden to offer triple-play types of services and really cement customer loyalty." —Shirley Brady

iN DEMAND Networks: Quality HD for High-End Customers

iN DEMAND Networks isn’t a cable operator, but it must think like one. This buying consortium negotiates for and acquires content for its cable operator owners — Comcast, Cox, Time Warner Cable and Advance/Newhouse’s Bright House Networks — and for cable affiliates including Cablevision, Mediacom, Charter and Insight.

And it’s been working overtime lately: From the moment last month when Major League Baseball and DirecTV cut a reported $700 million deal for the Extra Innings out-of-market games package that would exclude cable for seven years, iN DEMAND has been in the news.

In early April, iN DEMAND and Major League Baseball hammered out a seven-year deal for continued carriage of the Extra Innings package on cable. The successful negotiation of the deal with MLB highlights iN DEMAND’s vital role in securing sports rights for cable.

Its other premium sports include MLS Direct Kick, NBA League Pass and NHL Center Ice. In the non-sports arena, iN DEMAND is the exclusive TV home of Howard Stern. It also lines up pay-per-view events and acquires blockbuster movies for VOD.

iN DEMAND president and CEO Rob Jacobson took a few minutes out of his MLB negotiations to chat about his biggest non-baseball focus: the May 1 re-branding of its INHD hi-def channel to Mojo, designed to appeal to high-end HD fans.

Evolving to Fit Operators’ Needs

iN DEMAND has retooled its video lines in recent years to reflect the needs of its cable operator owners and affiliates. "We had 35 channels of NVOD (near video on demand) movies that we then moved over to a VOD platform," Jacobson says. "We’re virtually not in the movie pay-per-view business anymore [because operators’] business has moved to an on-demand experience."

Riding HD’s Wave

When iN DEMAND got into the linear networks game in September 2003 by launching INHD, the goal was to answer affiliates’ need for original — not simulcast — and unique high-definition programming. INHD "was largely about [touting] the technology" of high definition, Jacobson explains.

Today, he says, it’s no longer necessary for iN DEMAND or its cable operator owners to tout the HD part of their offering. Just as Comcast last month re-branded its Comcast on Demand lineup to "Channel 1," the logic is that cable subscribers understand the technology that’s delivering the content. Now, they’re simply demanding better-quality programming on all platforms.

So with the blessing of its owners at Comcast, Cox, Time Warner and Advance/Newhouse, iN DEMAND is retooling its original HD channel to focus on what internal research indicates to be an underserved segment of HD consumers: men 25-54 with household incomes of $100,000-plus.

Next up for iN DEMAND: migrating linear and nonlinear content online. "We’ll provide more and more of a robust broadband opportunity for our customers," Jacobson promises. He points to the Mojo website as a peek at what’s to come for cable affiliates, with short clips, sneak peeks and even full-length episodes available for viewing.

"Our DNA is still about transactional television, meaning giving consumers the ability to buy a certain program when they want to, whether that’s a movie or a fight or Howard Stern. That’s our core competency," he comments. "But we’ve really segued into a linear channel type of environment with Mojo, and now we’re bringing some of those same core competencies [to platforms] including HD VOD." —Shirley Brady