The quest for a high-definition television programming business model kicked into high gear last week, when Discovery Communications Inc. launched Discovery HD Theater on EchoStar Communications Corp.'s Dish Network.
The direct-broadcast satellite provider plans to charge customers a monthly subscription price of $7.99 for the new channel, following a half-day free preview that runs through August 1.
Discovery HD is the first national, subscription-based HD service. Feeds from premium programmers Home Box Office and Showtime Networks Inc. are typically offered free to cable or satellite customers who already subscribe to the standard-definition service, although cable operators often charge a monthly lease fee for HD hardware. DirecTV Inc. offers HDNet free to any subscriber with compatible HD equipment.
AT&T Broadband, Charter Communications Inc. and Cox Communications Inc. also said they've inked carriage agreements for Discovery HD, and each is expected to launch the channel in at least one market later this summer.
GEAR NEEDED
Though HDTV aficionados have been waiting for it, the Discovery HD experience wasn't available to all Dish customers.
To access the feed in true HD, subscribers require both a digital television, a late-model HD-capable Dish receiver, plus a dish pointed at the 61.5 degrees West orbital location.
Later this summer, Dish subscribers would also need an add-on 8PSK HD modulator, which helps boost the network's HD channel capacity, to receive Discovery HD. Dish plans to sell the add-on for $49, or waive the equipment fee for subscribers who commit to the network for a year.
Early adopters are not likely to balk at the subscription price for Discovery HD, Discovery executive vice president of affiliate sales and marketing Bill Goodwyn suggested.
"If people are willing to spend $5,000 for an HDTV set, I'm not sure we'll see price elasticity concerns," Goodwyn said.
Over time, Goodwyn and others envision that HD subscription programming would be packaged together and priced as a single tier.
"À la carte pricing on basic or digital nets is a challenge for us," said Cox vice president of video product development Lynne Elander. "I wouldn't be surprised to see things grouped together as a package as more [HD] channels come on board."
Though the monthly subscription fee could generate incremental revenue for operators, Discovery does not plan to offer advertising avails to its affiliates. To keep the programming clutter-free, ads run only before and after short-form programming, and during intermissions of longer shows.
The so-called sponsorships are used to help fund the higher costs of HD production, Goodwyn said. It could be late in the decade before Discovery HD Theater reaches the break-even point, he said.
SKEPTICS CHAT
Early into the launch last Monday evening, visitors to a DBS-oriented Internet chat room debated the merits of paying $7.99 per month for a channel with at least some commercial interruptions and with a heavy dose of repeated shows.
The skeptics were mainly the ones without access to the Discovery HD launch; those watching When Dinosaurs Roamed America
and Insectia
expressed great satisfaction with the HD picture. But some were disappointed that not all the programming was offered in Dolby Digital 5.1 surround sound.
Goodwyn said Discovery last week was inundated with email from HD enthusiasts.
"It's 1:30 a.m. and I just can't go to sleep," wrote one viewer who wanted to thank the programmer for allowing him to take advantage of his investment in HD equipment.
Besides the monthly subscription revenue, HD programming can help with customer-retention efforts, according to Goodwyn.
Once someone hooks a digital cable box or DBS receiver to an HD home theater and surround-sound system, "they're not going to change it out" to go to the competition, Goodwyn said.
AT&T plans to add Discovery HD when it launches its first HD service in Chicago late this summer. The MSO chose Chicago because of its technical readiness, director of new product development Jay Kreiling said.
Initially, the Chicago system will launch HD with a sidecar to its Motorola Inc. digital set-top box.
In addition to Discovery HD, AT&T plans to launch with digital broadcast feeds from Fox and NBC, as well as HD feeds from HBO and Showtime.
AT&T Broadband has not yet set a subscription price for Discovery HD.
In Cox's single HD market — Omaha, Neb. — subscribers need a special sidecar attached to their Motorola digital set-top boxes to access HDTV.
As of press time, Cox (a minority owner in Discovery) had not said where it would first launch Discovery HD. The MSO plans to disclose its first HD markets to use an integrated Scientific-Atlanta Inc. digital HD receiver very soon, Elander said.
Cox will also launch HD in other Motorola markets after an integrated set-top box is available, Elander said. First, on-screen programming guides must be rewritten and tested on the new boxes, she noted.
Charter, which launched HD in a handful of markets several weeks ago, has not yet determined when or where it will first add Discovery HD, nor how it will price or package the content, a spokesman said last week.
Discovery had planned to launch the service on the Satcom C4 satellite last week — with or without distribution — but Goodwyn said the company was pleased to be able to launch with a national partner like EchoStar. He admitted that the Dish negotiations came down to the wire, with the contract signed last Monday morning, following an agreement in principle over the previous weekend.
The partnership with Dish Network will allow the programmer to showcase its HD feed in any of the company's Discovery Stores across the country, as soon as the locations can be outfitted with satellite systems. Goodwyn said he expects the first wave of stores to be HD-ready within 30 days, after the company has a chance to talk to mall owners about roof rights.
While Discovery Stores won't sell Dish equipment outright, they will make brochures available touting the HD service. And in cases where the Discovery Stores are located in the same malls as Sears, Roebuck & Co. outlets, Goodwyn said, Discovery sales staff could direct customers to Sears to purchase HDTV sets and Dish equipment.
The Discovery Stores partnership is not exclusive to EchoStar, and the programmer would be open to similar relationships with cable affiliates, Goodwyn said. Dish's nationwide availability was a benefit, he added.
