Most cable programmers getting into hi-def say a commitment to HD must be backed up with a multimillion dollar investment in an in-house digital/HD operations center. An expensive proposition, to be sure. But it’s the only way to keep pace with advances in technology, they say. What’s less clear is whether cable operators will end up financing a portion of these investments through higher per-subscriber fees paid for HD channels. As it stands now, programmers aren’t talking—which is probably as good an indication as any that the cost of the new HD facilities will be passed on to operators eventually. "Our pricing policy is linked to the way the affiliate offers the service to their customers," Andy Heller, president of domestic distribution for Turner Broadcasting System, e-mailed. "We have not yet had any issues of import [with our affiliates] over our [HD] pricing policies." Discovery’s rates also depend on whether MSOs put it on a tier. "The new facility is not part of our rate discussions," Bill Goodwyn, Discovery’s president, affiliate sales and marketing, emailed. Mark Cuban—whose HDNet channels, in combination, cost $1.10 per sub—declined to discuss the possibility of sub-fee hikes. An NBC Universal spokesperson suggested it was unlikely that Universal HD, now offered at 40 cents per sub, would hike the fee to cover the cost of its new facility. But network executives were eager to discuss the investments they made in their HD centers—investments that they believe are necessary to play in the HD arena. Cuban, for example, says the only way to be taken seriously as an HD programmer is to build the infrastructure to produce, digitize and distribute hi-def content. "You have to go there—end of story," says Cuban, who launched HDNet in 2001. "Not going there is the equivalent of having all your music on 45 RPM records." Over the last two years, ESPN, NBC Universal and Discovery have been constructing in-house all-digital/HD operations centers. Like Cuban, as well as execs at ESPN and NBC Universal, Discovery HD Theater SVP Clint Stinchcomb is a believer in in-house HD facilities. "You can debate the timetable of when to do it," Stinchcomb says. "But you can’t debate the fact that the gravitation to HD will happen. The entire world will make the transition, just as the world went from black-and-white to color and broadcast to cable." "It’s almost like a commitment that can’t be avoided," says Andy Dale, CEO of The Outdoor Channel, which is four months away from launching its HD spin-off, Outdoor Channel 2. "Everyone else will be marginalized if they don’t. What’s the point of investing in programming when in five to 10 years that content will have no value in an HD world?" How Much Is It? ESPN spent an estimated $55 million on its HD channels last year, according to data from Kagan Research. Infrastructure and equipment costs for the digital/HD center are part of that total, says Kagan research associate Patrick Johnson. That’s more than three times the amount ESPN allocated in 2003 to equip and launch its first HD network, he adds. By comparison, HDNet spent $32 million last year on its pair of services, ahead of Discovery, which spent $36 million on HD Theater, and NBC Universal, which spent $14 million on Universal HD. So far, cable operators aren’t dissuading programmers from investing in HD operations centers. System owners see the value in upgrading facilities that generate original HD content. For now, operators appear to be willing to pay per-sub fees for HD channels offering exclusive fare. "The nature of the programming is a huge draw," Johnson says. "One thing we’re learning in discussions with operators is they’re not paying additional license fees for simulcast or duplicated channels. TNT is not getting [a per-sub fee]. ESPN and Universal HD are exceptions. They can get away with it, because what would a cable system be without ESPN or NBC Universal, especially connected with HD?" The Outsourcing Alternative Programmers that can’t afford to build their own facilities have been exploring what Turner’s EVP, tech operations Scott Teissler calls "the external solution"—hiring another company to handle the technical operations involved in operating an HD channel. In Demand, for instance, has used Comcast Media Center’s Denver facility as the hub for its two HD channels. Additionally, Discovery HD Theater has originated from Comcast Media Center. Despite the imminent loss of Discovery HD Theater as a client, Comcast has confidence that more programmers will use its facility; it is building out a space in its 305,000-square-foot transmission/production center that will be able to accommodate up to six HD or standard-def nets full time. That space will be open by mid-April, and a second space that can accommodate up to nine HD nets (using about 1,800 square feet of space) is slated for operation in June. An in-house facility works best for programmers that can amortize their costs across multiple platforms such as digital and VOD, says Rob Jacobson, president and CEO of In Demand. "If you can’t, outsourcing offers a lot of efficiencies at low or stable costs," he says. "Comcast had the infrastructure in place, so we didn’t need to put one up ourselves." Cuban understands that outsourcing can help smaller HD networks control costs. Nevertheless, he is concerned that programmers without in-house control may fall behind in adopting new technology. "Can they take advantage of interactive TV, commercial insertion and other applications?" he says. "Having everything internal allows you to create and control those opportunities as they come along." Dave Higgins, VP, engineering, at Comcast Media Center, disagrees, pointing to Comcast’s Denver complex, which he says is flexible enough to react when new applications come along. Comcast’s equipment is compatible with both 1080i and 720p HD production formats. "The advantage organizations like us have is that we can both move quickly and maximize the ability to scale," Higgins says. "So clients get the service they need when they need it. They don’t start from zero on new advances around the corner." Several HD programmers, including some start-ups, are ready to move into both the combo HD/standard-def space and the HD-only space. Higgins won’t name names, or say what they’ll pay to outsource. The Denver center also is modifying other spaces to handle future HD services for Comcast’s own portfolio of networks, including E!, G4, The Golf Channel and Outdoor Life. Outsourcing "is a great way to test-run your product," Kagan’s Johnson says. However, in the long run, an in-house facility is the more attractive option. "Outsourcing can set you up for the long haul," Johnson says. "You’re in the market while you embark on building your own house. I hate [to say] everyone will do their own facilities, but that’s where things are headed." HDNet’s Plan Cuban wouldn’t reveal how much money was invested to convert a building near Denver’s old Stapleton Airport into the operations headquarters of HDNet and sister channel HDNet Movies. The bigger point for Cuban is that the infrastructure for his networks is able to accommodate the best HD picture quality today, and will be able to handle emerging HD formats tomorrow. To that end, Cuban warns against building an inflexible HD facility. "What’s available now is the worst HD quality we’ll ever see," he says. "There’s room for improvement in picture quality, thanks to advances in compression formats and other techniques. The scary part for a lot of players in HD is that there could be a switch in formats over time, and that will change how they do things, or what they do." ESPN’s Plan ESPN’s 17,000-square-foot facility in Bristol, Conn., went into operation last June and houses three studios, 10 master control rooms, 68 Quantel servers for storing 3,000 hours of digital/HD content at a time and 44 tape machines. ESPN HD, which launched two years ago, moved into its new digital center in June; ESPN2 HD began operating there last month. The digital center’s opening accelerated the launch of ESPN2 HD, says Bryan Burns, VP, strategic business planning and development, ESPN. "A few days after [the opening], we met a group of executives from companies doing remote production for our events," Burns says. "Every one of those executives told us, after touring the center, that they would phase out trucks for standard-definition TV coverage. A month later, we had a major strategy meeting with [ESPN president] George Bodenheimer present, and decided to launch ESPN2 HD that day. We wouldn’t have been as aggressive in launching ESPN2 HD as we did without having that building." NBC Universal’s Plan NBC Universal’s digital/HD hub—12,000 square feet on the top floor of the Englewood Cliffs building that houses CNBC—goes into operation in June; Universal HD, the first HD network from General Electric’s media unit, will start transmitting from the hub by the end of that month. Currently, Rainbow Network Communications in Long Island, N.Y., provides the technical space for Universal HD. NBC Universal has used Rainbow as an outsourced facility since 2003, when the channel was launched as Bravo HD. At full capacity, the all-digital hub will handle all HD nets NBC Universal offers, as well as NBCU’s assortment of cable nets. Commercial insertion and trafficking will originate at the hub, and all signals eventually will be uplinked from a row of satellite dishes operating behind the building. "[The facility] gives us the greatest degree of flexibility possible, including a lot of spare capacity," says Ron Lamprecht, new business development director for NBC Universal. Other Network Plans Discovery HD Theater will begin originating from its new digital/HD center in late June or July. A 55,000-square-foot facility is rising in Sterling, Va., about 30 miles southwest of Discovery’s corporate headquarters in Silver Spring, Md. The center will handle transmission of all 14 U.S. Discovery networks by the end of August. Like ESPN and NBC Universal, Discovery won’t release the center’s budget. Before TNT HD launched in May 2004, Turner made sure there was an HD studio and transmission center in place. A portion of the production facility in Atlanta that serves as the home of TBS Superstation and TNT was blocked off for an HD upgrade two years ago. Independently owned WealthTV considered outsourcing its HD operation prior to launching last June. The HD channel eventually opted for total operational control and invested $10 million in 25,000 square feet of San Diego real estate. "The route we’re traveling shows people we’re serious as a player," says WealthTV president Robert Herring. About 20% of its content is produced at its operations center, which was built in eight months. Outdoor Channel is spending $12 million on a 28,000-square-foot HD operations center and is expanding its existing technical facility by another 30,000 square feet. Both centers are in Temecula, Calif., 60 miles from San Diego. The HD center is being built in a converted warehouse the programmer acquired for $2.6 million. Outdoor Channel 2 will launch July 1 from the expanded center. OC 2’s feed will originate from the HD center when it opens this October, freeing up the original facility for future HD needs. Not far from Outdoor Channel’s headquarters, Trinity Broadcasting System is converting its main studio facility in Costa Mesa, Calif., to all-digital/HD, in preparation for launching TBN HD. Trinity is spending $3 million on new HD cameras and master control equipment that will be able to handle up to nine channels. Another $6-8 million will be spent on upgrading a second studio in Costa Mesa and on other facilities around the country used by Trinity. Trinity is pooling funds with some ministries running on cable and broadcast syndication to buy HD equipment at a discount from vendors. "When you go to a vendor with a large order, the savings can be pretty strong," says Paul Crouch Jr., administration VP for TBN.

The Daily

Subscribe

Charter Asks for CBRS Interference Protections

The quiet period on the FCC ’s CBRS auction is up, and Charter was one winning bidder that commended the Commission for its efforts to encourage efficient use of the mid-band

Read the Full Issue
The Skinny is delivered on Tuesday and focuses on the cable profession. You'll stay in the know on the headlines, topics and special issues you value most. Sign Up