Mel marks territory in video wars
Viacom sensitive to pics in vidstores vs. VOD
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"Paramount wants to make money with its films, and video-on-demand could end up displacing existing revenue" from cassettes and DVDs, Karmazin said in a sneering tone during a panel discussion before a packed hotel ballroom on opening day of the 50th annual National Cable Show here.
"We're not going to do something quickly that will damage our business long term," he said. Viacom is particularly sensitive to the issue of movies in the videostores vs. VOD in the home because it owns both Paramount Pictures and Blockbuster Video.
Karmazin was reacting to the complaint by another panelist, Jerald Kent, president and CEO of Paul Allen's Charter Communications, one of the top five multisystem cable operators. Kent had said, "The windows for movies need to be improved" in order to make video-on-demand movies a driver of advanced digital boxes in cable subscribers' homes.
Cable operators can get a B movie as early as 30 days after its videostore window. By contrast, a videostore can get an exclusive window of 90 days or more on a box office winner that's priced for sell-through, not rental. The studios want to unload as many copies of a sell-through title as they can before it goes to pay-per-view, where anybody can tape it off the air.
The reason why the studios are so protective is that video sales and rentals funnel more revenues to the average movie than any other venue, including theatrical release. As Karmazin put it, Paramount would be more inclined to "expand windows, not collapse them."
The third panelist, Brian Roberts, president of Comcast, another top-five MSO, acknowledged the "tension" between Karmazin and Kent and said that the goal of cable operators was to "add value" to movies distributed by the major studios. After the panel session, Roberts said that video-on-demand could become so user-friendly to the cable subscriber that it would attract customers who had never set foot in a videostore, creating a win/win for movie studios and cable operators.
But another source said the movie companies would continue to give videostores exclusive windows of 30-90 days until cable operators agreed to hand over to the studios splits of subscriber revenues that go well beyond the usual 50%.
Panelist C. Michael Armstrong, chairman-CEO of AT&T, the biggest cable operator in the U.S., said was rolling out a digital box that would not provide all the services people got on their computers such as Internet surfing. In elaborate surveys of its customers, Armstrong said people didn't seem interested in a shotgun marriage of their TV sets and PCs. What they did want, he said, was video-on-demand movies and more cable nets.
After talking about the digital set-top box that allows cable subscribers to get a pizza delivered to their apartments at the touch of a button on the remote, Karmazin drew a big laugh when he said, "I have no difficulty using a telephone to order a pizza."
After CNBC anchorwoman and moderator Sue Herera commented that the advertising marketplace was terrible, Karmazin said ad sales were off only in comparison to an uniquely explosive market last year. The 1999-2000 TV season benefited from what Karmazin called "the dot-com phenomenon, when Wall Street was pouring funny money into the dot-coms," which they then shelled out to the broadcast and cable networks for splashy ad campaigns.
Karmazin said his sales people were now besieging all of the consumer advertisers to lay out big bucks in the fall because that's when Uncle Sam would be mailing rebate checks to every taxpayer. Karmazin said people wouldn't channel that money to their local bank, they would spend it, which was why advertisers should flood the airwaves with enticing commercials so they could get their hands on some of that rebate.
All the panelists deplored the escalating cost of sports rights, and Karmazin helped to deepen the gloom by saying that he expected more new bidders in the future, not fewer, citing AOL and Yahoo! as companies that were ready to jump into the auction. "You can expect rights fees to go up, not down," he said.
Karmazin reiterated his belief that the government should repeal its rule that one company could not own two major broadcast networks.
He said he'd "love" to make a bid on NBC should GE put it up for sale. He also said he would be "interested" in buying CNN if AOL Time Warner put it on the block.
