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Cable Operators

Mapping Nat Geo’s New Road

1/06/2006 7:00 PM Eastern

Like many National Geographic Channel shows, Naked Science’s photography simulating the Earth’s churning and explosive molten core couldn’t help but awe viewers.

It’s no wonder network executives are eagerly awaiting a late holiday present this month, the launch of NGC-HD, the simulcast HDTV service timed to coincide with its fifth anniversary.

Now in 56.3 million homes, NGC’s primetime ratings increased 41% to just under 0.4 in 2005, as its average number of viewers climbed by 51% to 271,000 and distribution inched up by 8%, according to Nielsen Media Research.

GEARING UP FOR A YEAR

Nat Geo has been preparing for its HD close-up for more than a year, having begun producing all of its first-run shows in the 720p format favored by corporate partner Fox Networks Group, which co-owns the network with National Geographic Ventures. At launch, 90% of NGC-HD’s shows will be in high definition, including a “negligible” amount upconverted from standard-definition programming, the company says. The remaining 10% will be SD programming.

Despite a three-year head start by rival documentary service Discovery HD Theater — its lineup now includes an exclusive HD show, Sunrise — NGC president Laureen Ong says her network doesn’t feel competitive pressure or any urgency to catch up with Discovery.

“[Discovery] has done it in a very different model,” Ong says, adding NGC had to wait until the time was right to start an HD service. Discovery HD takes programming from its broad spectrum of networks. “We had to get our business right, to get our programming model straight.”

Analysts agree that NGC is a likely choice for operators to consider in their HD tiers, considering the vivid photography that is a staple of the network. But they don’t quite buy Ong’s denial of any competitive urgency.

“Nat Geo has to compete with Discovery,” says Aditya Kishore, a senior analyst at research company Yankee Group, which completed a study on HD last month. “Discovery was probably the most aggressive network in terms of HD; they started before anybody did.”

Kishore urges programmers to invest heavily in building their HD libraries today even though only 13 million people subscribe to HD programming tiers out of 20 million who own HD-ready sets.

Continued declines in production costs helped NGC fund 127 hours of HD content at launch, a figure the network expects to reach 300 by the end of 2006.

Generally, filming in HD carries a 10% premium, but costs are declining because programmers can now produce their own material in-house, according to NGC vice president of network operations and production services John Fletcher.

“If we want to have 5:1 surround sound created, we can do it in-house for a fraction of the costs than an outside house,” he says.

“It used to be nobody had equipment and they clearly were able to charge a lot for it,” Ong adds. “That’s not the case anymore.”

In August, Ong’s boss, Fox Networks Group CEO Tony Vinciquerra, insisted the intent of NGC-HD wasn’t to make big profits. Instead, he told Multichannel News, “Our goal is to help sell the concept of high-definition.”

That’s fortunate, because at presstime the network had not announced any cable or satellite affiliates.

SUPPLY AND DEMAND

Ong, who denies that NGC-HD will face buckets of red ink, says lack of distribution is more an issue of capacity and working out a deal rather than lack of demand. Operators and consumers, the latter queried through a Beta Research survey, are bullish on the service, she insists.

Operators have been reluctant to pay license fees for HD network extensions arguing that amounts to double-dipping. “You have to balance what’s more important to you, getting that license fee or getting that [HD] carriage. It’s just a matter of Lindsay [Gardner] having to strike the right business deal, the right balance,” she says of the Fox Cable Networks executive vice president of affiliate sales.

“There isn’t anyone who has said they don’t want to carry us in HD,” she adds. “They have to look system by system what their capacity is. Soon they will have the availability to carry us and we’ll be the first one to be put on.”

That will be the true holiday present.

September