Rainbow Media's bright future As television continues to fragment, brands like Rainbow's will become more important, not less, says CEO Josh Sapan.
John Heilemann Business 2.0 Magazine May 15, 2006: 9:33 AM EDT http://money.cnn.com/2006/05/12/magazines/business2/rainbow/ (Business 2.0 Magazine) - From the time he was 8 years old, Josh Sapan wanted to be in the television business -- as a game-show host, to be precise. (He adored The Price Is Right and Say When!) Sapan is the CEO of Rainbow Media, the programming arm of New York's Cablevision Systems. When he tells me about his childhood fantasy, Sapan admits to being worried that it might sound a little weird. But it strikes me as less unusual, coming from a TV person, than his argument that it's suicide for cable channels to seek the largest possible audiences. "It's a terrible temptation," he says. "It's unbelievably appealing, but it's treacherous -- deadly." Sapan has been ardently preaching the gospel of narrowcasting for almost 30 years. But never has his catechism been more pertinent than it is today. The cable industry is in the early stages of a period of unprecedented change, propelled mainly by technology. HDTV. Video-on-demand. DVRs, iPods, YouTube. In the television mainstream, this upheaval is cause for panic because it portends the further fragmentation of the mass audience. But Sapan has never been afraid of fragmentation -- to the contrary, he's always celebrated it. Now he's taking that philosophy and applying it to chart Rainbow's path across the new TV landscape. Channeling the brand Sapan's interest in cable was first piqued in the early 1970s, when after college he read The Wired Nation, a book about the nascent industry. Sapan was enchanted by the idea that narrowcasting would allow for a cornucopia of programming diversity. But when he entered the business, as a marketer, he discovered that its denizens didn't fully grasp the implications of niche broadcasting. "Television people back then saw TV in terms of shows," he says. "They didn't think in terms of brands -- that channels could have identities." Sapan sought to change that, first at Showtime, where he worked for eight years, and then at Rainbow, which he joined in 1987. He led the development of AMC, expanding its reach from 5 million to 86 million homes. He turned Bravo into a sensation, overseeing the creation of Inside the Actors Studio and Queer Eye for the Straight Guy, and sold the channel to NBC for $1.3 billion. He launched IFC (independent films), Fuse (music), and WE (women's entertainment), elevating Rainbow "from a $40 million business to a $1 billion business," he says. What these channels have in common is distinctiveness and consistency. "One's brand is obviously intangible, but it's of monumental importance," Sapan says. "On most channels, the stuff you see is interchangeable. An awful lot of cable looks just like prime-time TV." Sapan contends that brands matter even more in light of the transformation unfolding in the world of video. With constraints on capacity disappearing, screens of various sizes proliferating, and linear programming being replaced by on-demand delivery, "we're going to see a reformation of the cable universe," he says. "Technology keeps changing faster and faster, but if we have brands that earn a powerful allegiance, we will be redeemed." In attempting to earn that allegiance, Sapan observes that companies such as Rainbow face a fundamental choice: whether to repurpose old material or create new content tailored to emerging platforms. Sapan analogizes the dichotomy to the Internet industry, in which you have, on one hand, old-line businesses that have thrown themselves online willy-nilly, and, on the other, services such as eBay (Research) that are, as he puts it, "native to the Web." To Sapan, the choice is a no-brainer: "What we're trying to replicate is the nativeness of eBay." Next-generation fare Thus has Rainbow's strategy for tackling the future been rooted in Sapan's three core verities: Brands rule, niches rock, and new formats require new forms of programming. Consider Rainbow's efforts in video-on-demand. There's Mag Rack, launched in 2001, which features what Sapan calls "superpersonalized content" focusing on categories from pets, weddings, and Pilates to motorbikes and cooking. There's Sportskool, launched in 2004, an on-demand service with sports instruction by big-name athletes -- learn soccer from Mia Hamm or skiing from, ahem, Bode Miller. Finally, there's IFC in Theaters, Rainbow's recent foray into "day-and-date" movie distribution: offering a first-run film at the same time it appears in cinemas. Then there's Rainbow's push into HDTV. Early last year Cablevision (Research) exited the satellite-broadcasting business, striking a deal with EchoStar (Research), which took a stake in Rainbow's Voom HD Networks and agreed to carry the channels for 15 years on its Dish Network service. Having built what Sapan claims is "the largest HD postproduction facility in the world," Rainbow is currently programming 15 HD channels, including Animania HD, Kung Fu HD, and, announced in March, Gameplay HD, the first high-definition channel dedicated to videogames. It's far too soon to render a definitive verdict on Rainbow's next-generation fare, but the early signs are encouraging. Its video-on-demand offerings are quickly gaining traction, especially in the case of Sportskool, which in just two years has achieved 75 percent penetration of all on-demand-enabled homes. And though Voom is struggling to find a foothold beyond Dish Network -- so far it hasn't been picked up by any cable operator, including Cablevision -- Rainbow may be better positioned than any company in the industry to take advantage of the inevitable explosion in demand for HD content in the years ahead. Rainbow also seems well positioned to deal with the advent of Internet TV. Cheap production tools and the rise of sites such as YouTube are making user-generated video one of the next big things on the Web. Just as blogs aren't likely to supplant the New York Times, amateur-spawned TV isn't likely to supersede Lost or 24. But it does seem destined to flood many of the niches that Sapan imagines serving. In theory, of course, this development might pose a threat to Rainbow. In practice, that's unlikely. For all its wonders, the Web can't hold a candle to TV when it comes to sheer visual splendor; it'll be a long time before the Internet reliably delivers real-time HD images. Nor are there many amateurs who can pony up for the services of, say, Mia Hamm. No doubt the Web will have microniche programming -- video aimed not merely at bird-watchers but at bird-watching seniors who have a fascination with species native to New Zealand. But those markets, in business terms, are too narrow even for Sapan. In fact, the Web and Rainbow (and other niche programmers) may prove to be largely complementary, not competitive. Together they may usher in the long-predicted nicheification of TV. Sapan, for his part, heartily endorses that speculation. For him, niche media is more than a theory. It's the game he's been playing for three decades. ================================ George Antunes, Political Science Dept University of Houston; Houston, TX 77204 Voice: 713-743-3923 Fax: 713-743-3927 antunes at uh dot edu Reply with a "Thank you" if you liked this post. _____________________________ MEDIANEWS mailing list medianews@twiar.org To unsubscribe send an email to: [EMAIL PROTECTED]
