Since launching in 1996, Discovery Communications' array of digital cable channels has yet to attract enough viewers to justify a survey from Nielsen Media Research, and direct-response commercials far outnumber blue-chip advertisers. A&E Television Networks' digital Biography Channel and History International Channel, both launched in 1998, are in similar boats.
But executives at both companies, and a growing number of analysts, say numbers don't matter in the fast-changing landscape of digital programming, and having any presence on digital cable TV is better than none.
STAKE A CLAIM
"The traditional methods of valuing media are becoming increasingly debatable in the new digital landscape, and forward-thinking cable TV programmers realize that it's important to stake some sort of claim on the spectrum, even if it's just a flank strategy for positioning down the road," says Tim Hanlon, VP-director of emerging contacts for Bcom3 Group's Starcom MediaVest Group, Chicago.
Battling to maintain cable's market share vs. the fast-growing satellite broadcast juggernaut, cable TV system operators have sunk billions into upgrading their networks for digital capability. Now programmers are racing to prove that viewers ultimately will opt for cable's more versatile digital programming, including exploding video-on-demand options. So far, more than 15 million consumers have digital cable TV access, and that number is expected to double by 2005, according to technology researcher Yankee Group.
"We're preparing for a future where most TV is digital and we deliver entertainment through a variety of formats," says David Karp, senior VP-general manager of Discovery's digital networks.
Examples of future formats include Discovery's Choice 10 Discovery, a service rolling out this year that gives cable system operators VOD entertainment that can be offered free to viewers. Content comes from Discovery's vast library of documentary-style programs and its digital channels-Science, Wings, Civilization, Home & Leisure, Discovery en Espanol and Discovery Kids.
Discovery also will offer long-format ads from marketers of luxury cars or computers through VOD on Discovery Sponsor Cinema, Mr. Karp says.
Next month, Discovery launches Discovery HD Theater, a 24-hour digital channel featuring high-definition programming on movies and assorted topics. Sponsors' ads will be featured between 30-minute program segments, he says.
"We're in the early stages of our digital strategy, and our current digital channels are just one part of the long-term plan," Mr. Karp says.
Discovery in this year's upfront market is introducing cross-media ad deals in which advertisers that buy analog programming also get on-air exposure on Discovery's digital networks.
Another new scheme is offering advertisers the chance to sponsor multiple channels at once-like Discovery, The Learning Channel and Science-around one programming idea such as "Technology Thursday," says Ken Ripley, VP-digital sales for Discovery Communications.
A&E also is bundling digital and analog ad sales for the first time this year. It recently inked a deal with Ford Motor Co.'s Lincoln Mercury giving the division exposure on A&E's "Biography" series on the analog cable TV dial, as well as the digital tier's Biography Channel, and also in the company's Biography magazine and on its Web site (aande.com).
The theme "New cultural icons" allows A&E to offer ongoing "roadblock" advertising surrounding various programs about people like Jerry Seinfeld, who will be spotlighted in June.
Although critics say much of the programming on A&E's and Discovery's digital channels is simply reheated fare from their analog channels, both companies say the digital channels feature substantial original, unique programming and allow a greater concentration of niche viewers, which suits advertisers.
Although the niche-targeting concept is so far drawing more direct-response advertisers than blue-chip brands, Discovery isn't bothered.
"We're not prejudiced against direct-response TV spots, and we're seeing a lot more mainstream brands like Dell computers and pharmaceuticals," says Mr. Ripley.
The struggle to win digital yardage is worth it, analysts say.
"Cable programmers need to capture revenue at a variety of levels and leverage their programming in every possible way, even if it's not big numbers immediately," says Sean Badding, VP-senior analyst with the Carmel Group, Monterey, Calif., which tracks TV technologies.
One advertiser-supported, all-digital network claiming success is Rainbow Media's MuchMusic channel, which offers music videos and on-screen exposure for viewers, who tend to be under age 35.
"We're under the radar because we're popular with kids and we're known more on college campuses than in the mainstream, but we're an example of the future of digital programming, where we target a very specific, passionate audience who knows where to find us," says Marc Juris, MuchMusic's president.
"As digital cable evolves, there will be better navigational tools that will make channel number and location on the analog dial irrelevant, and new metrics will redefine how viewers are measured and valued," says Starcom MediaVest's Mr. Hanlon. "So today's digital numbers are not very significant as a benchmark of where cable TV is going."