Market Watch

Sony Goes Basic with Two Cable Launches



Sony Pictures Television is ramping up launches of basic cable networks in the US with Sony Pictures Movies HD and FEARnet. The studio has a strong cable presence internationally, but not in the US. Not much is known about Sony Pictures Movies HD, other than an October 1 launch is targeted and the studio's film library is slated to provide the content.

FEARnet is a linear basic cable network also scheduled for an October 1 debut, which expands a FEARnet website and separate branded cable video-on-demand service launched October 2007 that programs horror, thriller and suspense content. FEARnet is a joint venture of Sony Pictures Television (providing content), Lionsgate (providing content) and cable giant Comcast (providing distribution). The cable VOD service has grown to 12m monthly video-on-demand views by subscribers of Comcast, Cox Communications, Verizon FiOS, AT&T U-Verse, Insight Communications and Bresnan. The sister FEARnet.com claims to be the #1 horror website.

Sony Pictures Television has an impressive array of basic cable networks internationally, led by local versions of Sony Entertainment Television (SET), action/adventure (AXN) and animation-oriented (Animax) channels. Its five-channel group is a leader in the Indian cable TV business. Domestically, SPT produces and syndicates first-run and offnet household names such as Jeopardy, Wheel of Fortune, Days of Our Lives, Dr. Oz, and Seinfeld.

Analysis
Basic cable networks are big money earners, so far showing little damage from internet video and video-on-demand (VoD). That Sony, the owner of streaming service Crackle.com and manufacturer of a whole line of web-connected devices, is attempting to expand its US cable presence comes as further proof of the robustness and resilience of the sector. Attractive as it may be, however, the cable space already resembles an all-you-can-eat buffet, which makes it a challenging environment for newcomers. Saturation of  nearly every promising genre (sports, weather, kids, comedy, science fiction, food, etc.), forces start-up networks to go after small, uncovered niches or pile on top of entrenched competition, as will be the case for Sony's new basic cable movie network.

Sony, of course, is not a typical newcomer given the breadth and depth of its film and TV experience. The studio boasts a large library of movie titles and hit TV shows, which gives it a distinct advantage over other new arrivals. Furthermore, Sony has had a lot of practice in operating cable networks internationally as well as selling ads domestically in the syndication market.

With that said, Sony Pictures Movies HD is unlikely to become a significant revenue stream for the company in the near future. Existing basic movie channels such as FOX Movie Channel (FMC) and Turner Classic Movies (TCM) generate no advertising revenue and fetch significantly lower carriage fees than most general entertainment cable networks. Screen Digest's US Cable Network Intelligence estimates that incumbent SD basic movie networks generate from $0.12 to $0.14 per subscriber per month in carriage fees. Broadcasting in HD exclusively, Sony's movie channel will generate even less revenue in the near term given the smaller pool of potential subscribers.

Sony, however, appears to have bigger plans for this channel. SPT executives have indicated their interest in complementing the movie content with short-form original fare in the future. If the studio truly commits to this direction, the mature channel would look more like TimeWarner's TNT than TCM. This move makes business sense for Sony, which is the only vertically integrated media conglomerate that does not own broadcast or cable networks in the US. The studio has had to rely on the local syndication market and cable networks owned by other conglomerates to distribute its film and TV properties domestically. With the local station market on the decline, Sony would be well served by a general entertainment basic cable network.

The newly formed FEARnet network will attempt to fill a niche that NBCU has been going after since 2007, with Chiller TV. FEARnet's VoD and online performance shows promise, but it is not clear if this success will carry over to the linear cable space. Having the cable giant Comcast as a partner in FEARnet bodes well for this channel, especially if the merger with NBCU is completed. By combining Chiller TV and FEARnet, the joint venture would have a de facto monopoly on the horror/thriller niche in the pay TV space.

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