for More Power, Choice, and Control
(Washington, DC) – Josh Sapan, president and CEO of Rainbow Media Holdings, Inc.(NYSE:RMG), addressed the Washington Metropolitan Cable Club today and offered his perspective on the role of content as the telecommunications industry forges ahead to offer new digital products and services. In the speech to cable executives and government officials, Mr. Sapan asserted that the industry has an opportunity to deliver an entirely new consumer experience, marrying VOD technology with new content, developed specifically for this new platform. He suggested that cable is well positioned to offer the richest on-demand experience by providing, via VOD and SVOD, not only the outstanding programming produced by existing cable network brands, but also new, specialized content that takes advantage of the unique properties of new technology.
"Video-on-demand or VOD presents a fairly big opportunity on a number of fronts. I think it will have an impact, commercially, for our industry; personally, for our customers; and potentially, culturally, as a means for social discourse," said Mr. Sapan. "What I'm suggesting is that we develop VOD brands founded on the specific characteristics of server-based technology. We can develop content that is built to take advantage of the unique capabilities of expanding server capacity, made possible by cable's heroic $50 billion investment in its two-way plant just over the last several years."
Mr. Sapan offered Rainbow's Mag Rack, the video magazine rack, as one example of content that can be developed to serve new audiences, and existing audiences in new ways. Mag Rack is the first service developed exclusively for VOD and SVOD. Its programming has not and cannot be seen anywhere else on television. Launched in September 2001, Mag Rack offers viewers 25 different video magazines, exploring a wide range of topics like photography, motorcycles, classic cars and basketry. Through the use of VOD technology, consumers are able to "put down" and "pick up" the video magazine at their convenience, skipping from subject to subject, from article to article.
"Mag Rack may be leading the way in providing exclusive VOD content, but we hope we won't be alone for long. The nature of technology is a wide invitation that this type of content be provided," said Mr. Sapan. "Before we know it, VOD and new content will be seen as going hand-in-hand and the market will be crowded with competitors. We think it would benefit our interests and cable overall. I believe it will raise all of our efforts to a new level of quality and public acceptance and in the end, it will mean the consumer wins."
Mr. Sapan's remarks pulled from technological innovations throughout history, with a focus on cable's track record of understanding consumer needs, embracing new technology and developing products that provide better services and better programming. He pointed to the rise of CNN in the 1980's, which spawned a 24-hour television news industry; and he reflected on Rainbow's growth through its own niche networks including, Bravo, which proved there is an audience for performing arts programming, and AMC, which developed the audience for classic film. He offered that the next phase in the evolution of television provides cable with the chance to continue its leadership by capitalizing on technology and serving consumer demand for a more personal television viewing experience. His comments included the following:
- "The real promise of the Internet was only fulfilled when sites like Amazon.com gave users endless choices, and when E-Bay put the buyer – not the seller – in charge of setting the price. These products were created just for the Internet and they had those unique genetics. Today, we think we have a parallel opportunity. On-demand programmers will need to seize that opportunity and create content that distinguishes what cable TV means from both a content and technological point of view," stated Mr. Sapan.
- "It is also clear that if VOD and SVOD becomes nothing more than a warehouse for the same content found everywhere else, cable will continue to experience the high rates of digital churn and we will lose a strong competitive advantage as compared to satellite," Mr.Sapan continued.
Mr. Sapan then went on to share his belief that the personalization of television will benefit society,
asserting that American diversity could find a broader place on television saying,
- "Because of barriers of technology, this country – blessed with amazing diversity – has often settled for entertainment and information that gloss over that diversity in hopes of reaching a mass market. Now, with new technology like video-on-demand, we can reach for that diversity at its most fundamental level – individual personalities, needs, and outlooks. If we embrace this challenge and make the most of this opportunity, our industry increasingly will have done something noble that we can all celebrate."
- "Perhaps new VOD content is the chance to use television to build something new that has certain social benefits. It is the chance to provide information on birthing to expectant mothers, the chance to give American Catholics coverage they can turn to in turbulent times, and the chance to let people explore the worlds of nature and art. And as we look toward the future, this technology could one day soon be used as a catalyst for community and political engagement, presented in an editorially neutral fashion. What if the NRA and the ACLU and the Sierra Club and the Christian Coalition could have their own magazine for this platform? It wouldn't just be SVOD – it might become a more active democracy on-demand."
Mr. Sapan's remarks to Washington Metropolitan Cable Club (WMCC) were part of a monthly luncheon series held in Washington, DC featuring guest speakers from the cable and telecommunications industry. WMCC serves more than 700 professionals in the Washington, DC area.
Attached is the full text of the speech. To speak to Mr. Sapan, members of the media may call Matthew Frankel at (516) 803-5141.
About Rainbow Media
Rainbow Media Holdings, Inc. is a subsidiary of Cablevision Systems Corporation (NYSE:CVC) and NBC. Rainbow manages AMC, WE: WOMEN'S ENTERTAINMENT, Bravo, IFC, muchmusic usa, Mag Rack, Rainbow Sports Networks, News 12 Networks, and MetroChannels as well as the Rainbow Advertising Sales Corporation and Rainbow Network Communications. In addition, Rainbow is a fifty-percent partner in FOX Sports Net. MGM (NYSE:MGM) owns a 20% stake in four of Rainbow's national networks – AMC, Bravo, IFC, and WE: WOMEN'S ENTERTAINMENT.
President & CEO, Rainbow Media Holdings, Inc.
Remarks Delivered at the Washington Metropolitan Cable Club
Thursday, June 20, 2002
Thank you for the invitation to speak today. I'm quite pleased to be here.
I thought I would spend my time today sharing a few thoughts about the emergence of on-demand technology, and how the content for this new platform might develop. Video-on-demand, or VOD, seems to present a fairly big opportunity on a number of fronts.
I think it will have an impact commercially, for our industry; personally, for our customers; and potentially, culturally, as a means for social discourse.
But, I'd like to begin today, talking not about television, rather about a book called Stupid White Men. It's by Michael Moore – the man who made the movie Roger and Me. While some may take issue with the title, I think the story of how this book came to be published offers a window into the world we live in, and is quite relevant to our discussion today.
The book was scheduled for release in early October 2001. By September 10, 50,000 copies were sitting in a warehouse in Pennsylvania, ready to be shipped.
Then, the tragic events of September 11 took place.
Immediately, Moore's publisher decided that it might not be the right time to release a book that passionately decried leaders in both parties and the overall state of our political system.
Moore was asked to rewrite most of the book. He refused to change a single word. The publishing company refused to release the book. By early December it looked as if all 50,000 existing copies would be shredded to a pulp.
That's when Moore delivered a speech to a citizen's group in New Jersey where he casually mentioned what was going on. A librarian from Englewood, NJ heard the story and alerted her fellow librarians via an online librarian discussion group.
Suddenly, an army of angry librarians barraged the publisher with literally hundreds of letters, phone calls, and emails. The publisher waved the white flag and released the book. It quickly hit number one on The New York Times and Amazon.com best-seller lists.
The moral of the story is not to avoid infuriating a librarian. All of us who remember the terror of a librarian "shushing" us as kids already know that.
Instead, I see this as a story about how today's technology is changing the way we live and act and see the world. When legions of librarians across the country can organize themselves effortlessly, communicate with one another instantaneously, and convince a powerful publisher to change course, there is a lesson to be learned for all of us. Today's technological advancements are putting more and more power into the hands of individuals.
Whether it is the Internet, cell phones, handheld PDA's, or the newest platforms in cable television – such as VOD, our cutting edge technologies are driven by and are – in turn – driving a common imperative: giving everyday consumers more choices, more personal decision-making power, and an increased ability to personalize the world around them.
This personalization seems to be our future. Making this a reality is our challenge and may define all of us in the years ahead.
Throughout history, each advancement in technology seems to have had a logic all its own. For instance, it's no accident that the first book Gutenberg printed was the Bible. It made much more sense to mass produce one book that everyone wanted to read than to print several obscure ones, each for a small audience. This was the promise of the printing press.
As we all know, approximately one hundred years ago Henry Ford unveiled his assembly line. Then, the public was demanding one-size-fits-all, cookie-cutter products whether it was cars or furnishings from the Sears Roebuck catalog, like kit houses. Ford turned out car after car – in an endless stream. He said, "You can buy my Model T in any color you want. As long as it's black." And he became the most popular man in America.
Well, you wouldn't get very far making that kind of offer today. Everywhere we look, people are rejecting one-size-fits-all products and looking for more personal choice and control. Online and on TV. With customized compact discs and custom-created cars. With the explosion of choices at newsstands and in the grocery store cereal aisle. People today seem to be looking for options, searching for personalization, and rejecting decisions imposed on them from on high.
But doing just that has been the story of cable.
When Ted Turner founded CNN in 1980, few thought it would work. But he understood the promise of cable technology and what it all meant. He saw that cable TV meant there was not only room for 24-hour news, but a demand for it. Now, of course, CNN is more than just a business. It is a powerful force that brings people together from all across the globe. And while it paved the way, it is no longer alone. Today, there is room for four all news networks, a weather network and a business news network.
Rainbow was founded more than 20 years ago, with a similar notion: that cable's promise was the ability to reach defined, niche audiences. That's why we launched Bravo in 1980 – even though it was assumed by many that there was no viable audience for a network devoted to performing arts. When we began American Movie Classics, AMC, in 1984, old movies were only shown on TV late at night. They were the filler between the "Tonight Show" and the end of the day test pattern. AMC now reaches 82 million homes.
In 1986 Rainbow launched News 12 Long Island – the first regional news network. I'll admit that I was at the head of the line when it came to skeptics. There was no way I could imagine the existence of an audience for a network devoted to Long Island news. Now there are six News 12 regional networks and they reach about 3.3 million people in the New York metropolitan area. And there are 24 regional news channels across the country including one here in Washington, D.C. The technology provided the opening and built the demand curve.
Now the technology is changing again. Video on demand or VOD allows viewers to call up a single program stored on a server at the cable system's head-end whenever they want. They can stop, fast-forward and rewind it, as they would with their VCR. Subscription video-on-demand, or SVOD, lets consumers purchase a series of programs – just as they would a magazine subscription – and then watch the shows when they choose, again, with VCR-like functionality. The growth of VOD and SVOD promises to transform our industry – but only if we are willing to follow the two-fold opportunity presented by the technology – new content and new context.
When you look at products like HBO on Demand or Discovery on Demand, you see that the strongest SVOD services today are coming from the existing brands in the business. It's clear that consumers want their favorite movies or shows like "Sex in the City," "The Sopranos," and "Wild Discovery" — all on-demand.
But, what these services are not doing is generating new content. If VOD and SVOD become only a warehouse for the same content currently on traditional, vertical networks, including our own, cable is likely to continue to experience high rates of digital churn and lose a potential competitive advantage as compared to satellite. It would be the same as if cable TV had stopped at delivering a clear signal in areas where television otherwise couldn't be seen. That's where cable began. Instead the industry continued, developing new content forms that proliferated in ways that were then unimagined. New content provides new business opportunities.
Yet to really take full advantage of the technology, VOD doesn't just need its own content, it needs its own context. What I mean by context is the unique experience that each new technology makes possible. We have to take advantage of the inherent opportunity that the specifics of the platform represent. It promises to be somewhat of a big deal.
An example to illustrate what I mean:
Several years ago, many companies moved their existing content onto the Web. But providing Web-specific content wasn't enough. The real promise of the Internet was only fulfilled when sites like Amazon.com gave users endless choices, and when E-Bay put the buyer – not the seller – in charge of setting the price. These products were created just for the Internet and they had those unique genetics – and a unique context.
The most successful Internet entrepreneurs saw the direction the technology was headed and then got behind the wheel to lead the way.
Today, we think we have a parallel opportunity. What I'm suggesting is that we develop VOD brands founded on the specific characteristics of server-based technology. We can develop content that is built to take advantage of the unique capabilities of expanding server capacity all the time, made possible by cable's heroic $50 billion investment in its two-way plant just over the last several years.
The satellite companies have promised to put a personal video recorder, or PVR, in nearly every home at a reasonable price. As you know, PVRs, such as TIVO, give consumers their own hard drive so that they can either watch TV and record another program at the same time, record two programs simultaneously, or even pause live TV while they fix a snack in the kitchen. Giving consumers the ability to create their own in-home, on-demand experience, PVRs have the potential to proliferate dramatically. In fact, recent sales have picked up. So, the immediate competition is which platform will provide the greatest on-demand experience – cable or satellite. Programmers will need to seize the opportunity and create an experience that distinguishes what cable TV means from both a content and technological point of view.
We at Rainbow have taken a modest step in this direction. In September of last year, we unveiled something called Mag Rack – the video magazine rack. This is the first and only service designed specifically for VOD and SVOD. It offers new content – created just with VOD in mind – and nothing on it has been seen anywhere else on the television screen.
The background for Mag Rack is that during the 1990's the number of print magazines on the newsstands grew from about 2,600 to well over 4000. Mag Rack brings that world of choices to the TV screen. It delivers programming that explores a wide range of topics that is unavailable anywhere else on television – all with unprecedented viewer control. Just like at a newsstand, customers can choose from Mag Rack's selection of video "magazines," with subjects from photography to wine, from motorcycles to classic cars. Just like reading a favorite magazine, viewers are able to "put down" and "pick up" a video magazine at their convenience. They can skip from subject to subject, from article to article. They can rewind, pause, stop, and fast-forward as they desire.
This is not the place for a commercial for Mag Rack, but pictures may tell the story best, so I'd like let me run a brief video. It is sales oriented in nature but it will give you a better sense of what I'm talking about.
(videotape)
Mag Rack enables us to serve the corners of niche areas of content that no one else could or is likely to do on a 24-hour a day channel. And though they don't currently have a place on TV in the 24-hour paradigm, these niches aren't necessarily irrelevant. For example, more than 43 million people consider themselves amateur photographers; there are 20 million motorcycle enthusiasts; and Americans spend an amazing $40 billion on weddings each year. At the same time, we balance it out with smaller niches, such as the one for the magazine called "Shakespeare."
Perhaps new VOD content give us the chance to use television to build something new that has certain social benefits. It is the chance to provide information on birthing to expectant mothers, the chance to give American Catholics coverage they can turn to in turbulent times, and the chance to let people explore the worlds of nature and art.
And as we look toward the future, this technology could one day soon be used as a catalyst for community and political engagement, presented in an editorially neutral fashion. What if the NRA and the ACLU and the Sierra Club and the Christian Coalition could have their own magazine for this platform? It wouldn't just be video-on-demand – it might become a more active democracy on-demand.
Mag Rack may be leading the way in providing distinctive VOD content, but we hope we won't be alone for long. The nature of the technology is a wide invitation that this type of content is possible. Before we know it, VOD and content specifically for the platform will be seen as going hand-in-hand and the market we hope will be crowded with competitors. We welcome this development. We believe it will raise all our efforts to a new level of quality and public acceptance and in the end, it will mean the consumer wins.
If we do so, and if we do it right, I'd like to think we'd be doing more than writing another chapter in our industry's story, but that we'd be adding in a real way to the fabric of our country. Because of barriers of technology, this country – blessed with amazing diversity – has often settled for entertainment and information that gloss over that diversity in the understandable hopes of reaching a mass market. Now, with new technology like VOD, we can reach for that diversity at its most fundamental level – individual personalities, needs and outlooks on TV. If we embrace this challenge and make the most of this opportunity, our TV industry increasingly will have done something noble that we can all celebrate.
Thank you.