Tune in This Week for a New Breed of Cable TV

Entirely Ad-Supported Reelz Channel Launches With No Subscription Fee

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NEW YORK (AdAge.com) -- When Reelz channel finally gets off the ground after seven years in the making, it may signal a new model for cable-TV economics: totally ad-supported.
Reelz, the cable channel about movies, is ending its six-year gestation period. But should it have gone the broadband route?
Reelz, the cable channel about movies, is ending its six-year gestation period. But should it have gone the broadband route?

Of course most cable networks carry advertising, but they also get a good share of their revenue -- anywhere from 30% to 60% -- from subscription fees cable operators pay them and, in turn, pass along to the consumer. Reelz will not collect subscription fees. Instead it will earn all its dollars from advertising, branded entertainment and online commerce. That brings it a little closer to a broadcast -- or free broadband video -- model than a cable one.

"We have an enormous amount of momentum already," said Rod Perth, who's helming the channel and has been there for almost all of its six-year development period, one of the longest gestations in cable history. He joined the channel in September 2000.

Movie channel with no movies
Reelz is a movie network that doesn't show movies, but rather airs programming about movies -- director interviews, behind-the-scenes footage and a news show called "Dailies," which it says will be like an ESPN "SportsCenter" for movies. The goal, Mr. Perth said, is to help people navigate the more than 4,000 movies available to the average multichannel household.

Aymon DeMauro, a former ESPN VP, is heading up ad sales, and said one of his secret weapons is localization technology the network will use as part of its programming. Knowing a viewer's market and cable or satellite system will help Reelz direct them to the movies on the system. It will also allow advertisers to add local info to national spots -- the name and address of an area auto dealership in a national Chevy ad, for example. The Weather Channel has a similar technology.

Mr. DeMauro said Reelz has secured a round of direct-response advertisers and also is pitching movie studios and brand marketers.

Biggest cable launch ever
The network is slated to make its debut this week in 28 million homes, making it the biggest cable launch ever. Its no-fee distribution model is one reason the network has managed to secure carriage deals with operators such as DirecTV and Dish Network. Another factor is the man funding it -- Stanley Hubbard, who may be one of the last people one would expect to launch a multimedia brand.

The 72-year-old billionaire owner of Hubbard Broadcasting could be considered a media dinosaur in terms of his portfolio, which is rich with low-growth, high-cash-flow traditional media: radio and TV stations. But he was an early adopter in the satellite space, part of the team that launched what is today DirecTV. (His U.S. Satellite Broadcasting service was sold to Hughes, which marketed satellite services under the moniker DirecTV.) Under terms of the deal, DirecTV agreed to give consideration to any channels Mr. Hubbard decided to launch.

"The Hubbards have a long history of entrepreneurship that has usually been successful," Mr. Perth said. When the family operated U.S. Satellite Broadcasting , they distributed HBO and Showtime for DirecTV and did massive amounts of consumer research on how to encourage their subscribers to watch more movies. What they learned bore Reelz.

Why cable, not broadband?
Of course, to launch a cable network in 2006 seems like a strange move to some. After all, broadband has passed the 60% mark, broadcasting over the internet is getting easier and cheaper -- why anyone would bother to launch a cable network instead of going the broadband route?

It's simple, Mr. Perth said. "You may be able to do that in the year 2006, but you couldn't do it in 2001, 2002 and 2003. Broadband was still a nascent emerging delivery system." Today he insists he is marrying the network with "a robust web platform" that will not rebroadcast what airs on the network but instead offer original content and service information to help users find movies covered on Reelz.
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