Cablevision's Voom encountering startup problems

[rtt2]

Cablevision's Voom encountering startup problems
Installed receiver dishes to be replaced
BY HARRY BERKOWITZ<
Staff Writer

May 13, 2004, 4:11 PM EDT

Since Cablevision Systems Corp. launched its Voom nationwide satellite TV service in October, one in five customers who tried it have dropped it.

And later this year, subscribers may have another reason to dump Voom as it shifts to a bigger home satellite dish, nearly twice as wide, requiring the dishes installed so far to be replaced.

The startup problems are revealed in a document Cablevision filed this week with the Securities & Exchange Commission for the planned spinoff of Voom into a separate company.

Although Cablevision executives expected a turbulent shakedown period for the service, which stresses a wide array of high-definition TV channels, some of the problems go beyond their expectations, including the extra-high cost of attracting subscribers, according to the 180-page filing.

The need to install a different type of dish, 35 inches wide by 20 inches tall, stems from a new deal to lease satellite capacity from SES Americom, to supplement Voom's own Rainbow 1 satellite and expand channel capacity. Voom will replace the current 20-inch round dishes for free but warns "we do not know how much customer resistance to the larger antenna size we will encounter."

As of April 23, Voom activated 8,000 customers and another 3,400 were awaiting installation.

Jericho-based Voom also ran into operational problems with the existing dishes. "We believe that most of these problems have been eliminated but, because our hardware and software are new, we continue to encounter operational issues that need to be addressed and resolved, and we expect that we will continue to encounter problems in the future," especially as Voom shifts to a new technology called MPEG-4 that allows more channels. Installation snafus with over-the-air antennas that pick up local signals, and delays in signing up cable channels, also hurt.

In February, Voom, which originally charged $750 for equipment but ran into resistance, began offering an alternative of paying $9.50 per month, plus $5 for each additional receiver, or $499 upfront plus $199 for each extra receiver. Program packages cost another $40 to $80 per month.

The hiccups for Voom, which posted a $54.8-million operating loss in the first quarter and expects to require $482 million in funding this year, are fueling the skepticism of Wall Street analysts, who question whether it can compete against DirecTV and EchoStar Communications, which have 22 million subscribers combined.

JP Morgan Securities analyst Jason Bazinet warns that the spinoff, formally called Rainbow Media Enterprises, may have a hard time raising $1.2 billion to $1.4 billion it needs to carry it beyond next March 31.

Voom is not the only part of the spinoff with financial hurdles. Cablevision's chain of 53 movie theaters, excluding the Ziegfeld in Manhattan, which is staying with Cablevision, posted losses of $230 million since January 1999, the filing said.

http://www.newsday.com/business/ny-...120445,print.story?coll=ny-business-headlines

 

[stucky_boss]

this doesn't sound to good overall. hopefully Voom will be able to get into Best Buy or CC as discussed in other threads to get the subscriber base up, else we may be paying our bills to D or E next year, 12,000 subscribers isn't going to cut it.

But on the brighter side we will all be getting new, albeit huge dishes which will mean more HD, and I like that thought!

 

[rtt2]

I am so tired of hearing of people saying VOOM needs to get into BB or CC. The fact is they can't. If they could Echostar would be there already.
DirecTV has an exclusive agreement with these chain retailers that prevents VOOM or Dish Network from entering.
No offense Sticky I didn't want to lash out at you but it is just not possible. DirecTV just brings in too much monthly residuals to BB & CC to abandon them.
VOOM will just have to rely on specialty retailers and regional consumer electronic retailers. Maybe they can get it Radio Shack or Comp USA or some other chain.

 

[mike528]

" Since Cablevision Systems Corp. launched its Voom nationwide satellite TV service in October, one in five customers who tried it have dropped it."

I don't have my calculator handy, but I think that means that four out of five customer who tried it have not dropped it. Or that 80% of customers who tried it have kept it.

 

[vurbano]

getting another dish for free to pick up another satellite is a bad thing?

 

[vurbano]

The dish is 18" not 20"

 

[stucky_boss]

It's Stucky not Sticky.

I understand that it is not feesable (right now) for them to get into BB but if they are not able to get in the door at some good retail stores that sale a lot of HD sets or they don't get in at every specialty retailer possible that sales HD (and those differ in regions of the US), Voom will be doomed. It's only a matter of time before D and E start carring more HD.

One can hope that eventually the contract between BB and D would expire opening the door to Voom. BB would still be able to make money, and if D still wants subscribers from BB it would have to say okay to competition from Voom and E or bye to potential money. I think D would rather have the ability to try and make money. But thats a whole nother story...

 

[stucky_boss]

getting another dish for free to pick up another satellite is a bad thing?

I don't know if you are refering to my post but I ended it saying I liked the thought of getting more HD.

 

[Bilodeaumj]

Posted: Wed., May 12, 2004, 6:24pm PT

Rainbow spinoff plans hinge on refinancing

Major financial hurdles still to be crossed

By MEREDITH AMDUR


NEW YORK -- If Cablevision investors were looking to ease their concerns about the prospects and costs of its new Voom satcasting platform, they probably didn't find comfort in documents filed with the SEC this week outlining the company's plan to spin off Rainbow Media Enterprises.
New York area cabler hopes to spin off the unit -- which comprises the nascent high-definition satcaster along with cable nets AMC, IFC and WE and Clearview Cinemas -- to shareholders later this year.

But there are still some major financial hurdles to cross before Cablevision can take the entity to the stock market, analysts noted.

Company has indicated that the stock listing is dependent upon refinancing all of Rainbow's outstanding debt load of up to $1 billion. That could prove challenging given current weakness in the high-yield bond markets and the high-risk nature of Voom.

Cablevision is already committed to spending some $237 million to fund Voom this year and claims it has financing in line from banks and existing credit facilities to fund the startup service through the first quarter of 2005.

Analysts at JPMorgan said the tenuous funding environment could delay the spinoff and prompt further investment by parent Cablevision -- the one thing investors are anxious to avoid.

To date, Voom has 8,000 subscribers but had a 21% churn rate in its first several months. Company admitted in its Form 10 that the service got off to a bumpy start with insufficient programming, some technical issues with receivers and overly high equipment prices.

Service now offers 36 channels in high-def, 21 of which are new and exclusive to Voom; over 80 channels of standard-def programming; and 18 channels of audio programming. Programming packages are currently priced from $39.90 to $79.90 per month.

Read the full article at:
http://www.variety.com/story.asp?l=story&a=VR1117904795&c=18

 

[Bruce]

" Since Cablevision Systems Corp. launched its Voom nationwide satellite TV service in October, one in five customers who tried it have dropped it."

I don't have my calculator handy, but I think that means that four out of five customer who tried it have not dropped it. Or that 80% of customers who tried it have kept it.

Yeah but that would be 20% churn and DirecTV had between 1-2 % this quarter

 

[vurbano]

If I understand this correctly voom now has under mpeg2 what?
35HD and 80 SD

after mpeg4 they will have 58HD and 176SD on rainbow1 alone

then 39HD and 156 SD on amc6 under mpeg2

if mpeg4 is applied amc6 could offer say 60HD and 300SD?

So total could be 118HD and 476SD? capacity under mpeg4?

 

[jgantert]

WalMart

I am so tired of hearing of people saying VOOM needs to get into BB or CC. The fact is they can't. ...

I'ld like to see them get into WalMart. I was in there the other day, and they have lots of HDTVs hooked up and displaying a HD picture (Discovery HD, I think). Looks like it was DishNetwork, tho. The SD picture was definately Dish. It was nice they have the two different sources, it was very easy to see the difference. Hopefully the "common Joe" WalMart shopper will notice the difference too.

-John

 

[rang1995]

" Since Cablevision Systems Corp. launched its Voom nationwide satellite TV service in October, one in five customers who tried it have dropped it."

I don't have my calculator handy, but I think that means that four out of five customer who tried it have not dropped it. Or that 80% of customers who tried it have kept it.

This was unique with the MBQ.and free programming.there were quite a few who had other service who were from the get go just try it,or use it and say bye bye so they had free extra programming for those months..i am sure this rate will drop now

 

[stucky_boss]

I'ld like to see them get into WalMart. I was in there the other day, and they have lots of HDTVs hooked up and displaying a HD picture (Discovery HD, I think). Looks like it was DishNetwork, tho. The SD picture was definately Dish. It was nice they have the two different sources, it was very easy to see the difference. Hopefully the "common Joe" WalMart shopper will notice the difference too.

-John

I was thinking the same thing, only I wondered if that would hurt Voom? The majority of people that buy HD sets have spent quite a bit of money and want top quality. I wonder if people that already don't know what Voom is would think that it was "lower quality" since it is at wal-mart - that is people already with HD sets not purchasing from wal-mart. Not that everything at wal-mart is poor quality, but I think most people wouldn't buy their HD components from them. Any thoughts?

 

[Ken F]

Yeah but that would be 20% churn and DirecTV had between 1-2 % this quarter

Keep in mind DirecTV requires every new customer to commit to a year of service. As soon as VOOM requires a commitment, or adds some incentive for the customer to commit, their churn should drop substantially. As range1995 notes, VOOM also had money back guarantee with five months of free programming -- some unscrupulous individuals may never have had any intention of paying for the service.

 

[A_Noland]

If this was 1999 and money was flowing into the stock market they could survive, but if you watch CNBC in the mornings you know they keep talking about how money is flowing OUT of the market, not in. Unless cablevision keeps them I don't see how they can survive.

 

[jgantert]

Keep in mind DirecTV requires every new customer to commit to a year of service. As soon as VOOM requires a commitment, or adds some incentive for the customer to commit, their churn should drop substantially.

If Voom requires a year of service, I would bet nobody would join. With all of the install nightmares, just think about getting stuck with a non-working system for a year! I can't even imagine!!!

After a month, I am still without a working OTA setup. If they don't get it working, it's nice to know that I can cancel without breaking a contract.

-John

PS> As for Wal-Mart, I think the exposure would outweigh any negative association with cheap Wal-Mart stuff.

 

[Ilya]

If Voom requires a year of service, I would bet nobody would join.

I would! The privilege of having 35 HD channels is well worth it. Many of us readily paid $800 for VOOM STB last year even before the money back guarantee was extended through April. This was an equivalent of the annual commitment, IMO.