"The cable [multiple system operators] are being cautious, and they're looking for revenue models that bring viewers in at a low cost, and in ways that can be offset by subscription revenue and advertising," says Frank Barbieri, analyst with consultancy Filter Group.
Mag Rack debuted last fall, and Mag Rack last week signed a long-term distribution agreement with Insight Communications. It's Mag Rack's first such pact with an MSO other than New York's Cablevision, which owns 74% of Rainbow. The Insight deal will take Mag Rack national in selected cities; currently, it airs only on iO: Interactive Optimum, Cablevision's digital cable TV unit.
Mag Rack has shopped its service to cable operators since last fall, says Matt Strauss, Mag Rack's general manager.
Cablevision subscribers with digital capability currently can pay an additional $9.95 a month to receive Mag Rack's dozens of magazine-like, niche-oriented programs targeting connoisseurs of motorcycling, wedding planning and wine; new (30- or 50-minute) segments are added each month. By June, Mag Rack will have 25 different channels and expects to reach 40 by yearend.
Such services are touted as cable's best new weapon in countering satellite service growth. Mag Rack wants cable TV operators to pay Rainbow a fee for its content. But Rainbow also has signed deals with American Express Publishing Corp. and Primedia to harness magazine content for future programs, and there likely will be advertiser tie-ins to future VOD content deals with magazine publishers, Mr. Strauss says.
"To combat consumer attrition to satellite, cable operators have to make digital cable more attractive," says Ari Kishore, a media analyst with Yankee Group. "VOD is superior because viewers can access programming all the time, not limited by the size of the hard drive on a system like TiVo, which is satellite broadcasting's weak spot."
Most major cable TV programming companies, including Discovery Communications and Walt Disney Co.'s ESPN, have announced VOD plans, but E. W. Scripps Co.'s Scripps Networks has an early lead, with a fast-growing array of VOD programs from its Do-It-Yourself Network, Food Network and HGTV.