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Dan Ryan’s Hope: Small Ops Tap Into Ad-Avail Revenue

8/26/2005 8:00 PM Eastern

Small cable operators that have had to pass up local ad avails are getting a new opportunity to tap into that revenue stream with a service created by former Charter Communications Inc. executive Dan Ryan.

Ryan, who had been head of Charter’s Rocky Mountain region before breaking out on his own in 2001, has started a new venture called Blue Vista Media, a division of his RPM Group that will allow small cable operators to share the revenue from network ad avails.

Blue Vista already has a deal with USA Network to uplink the channel’s East Coast feed with preinserted national and regional ads running during local avails.

In the past, very small cable operators have not been able to take advantage of those local avails because the cost of buying equipment and maintaining an ad-sales work force was too prohibitive.

With Blue Vista, smaller operators will only have to invest about $600 for a receiver to download the channel from Galaxy 13, transponder 24, located at 127 degrees. The advertisers work with Blue Vista Media and with AdPro Networks, another division of Ryan’s RPM Group, to generate advertising content, and the operators share the revenue the advertisers provide.

Ryan also hired former Comcast Media Center director of sales and new business Kim Gilmartin as president of Blue Vista. Gilmartin is well-known to small cable operators through her stint with the Media Center as well as its predecessor, Tele-Communications Inc.’s Headend In The Sky (HITS).

Ryan left Charter in 2001 to start his own small cable company, Precis Communications. Precis, which had about 16,000 subscribers at one point, sold out earlier this year. But Ryan said that before the company was sold, he bought Precis’ uplink facility in Salt Lake City, Utah, with the idea of using it to distribute local avails.

Precis had built the uplink facility mainly to improve its broadcast signal quality, Ryan said. Later, the company tried to use the facility to provide turnkey advertising to local operators, mainly in the form of a 24-hour infomercial service.

While that didn’t work out — Precis had about 120,000 subscribers on the turnkey service — Ryan said that he had an idea for even smaller operators.

“If we can take down a network feed at our facility, we can treat the facility like we would any headend, put in ad-insertion gear and then, instead of shipping it out to our cable subs, we put it back up on a different transponder. Then the cable operator just repoints their dish, and puts in a low-cost receiver.” Ryan said.

USA Network gives cable operators about 2 minutes of airtime per hour to sell to local advertisers. But because of the cost of headend equipment and a sales force to sell the ads, most smaller operators pass up that revenue stream.

Ryan said that Blue Vista will split the revenue from the avails 25-75, with 25% going to the small operator. He said the service is manly targeted at systems with 1,000 subscribers or less per headend. There are about 1 million to 1.5 million subscribers on systems in that range, he said.

“On a system of 500 subscribers or better, the payback is less than one year,” Ryan said.

BUFORD SIGNED ON

So far, Blue Vista has signed on Buford Media as its first customer. Buford, which has about 50,000 subscribers in Oklahoma, Kansas, Arkansas and Texas, will utilize the Blue Vista service on about five systems with about 10,000 total subscribers.

Buford Media CEO Ben Hooks said that in the past, small operators would have to spend a considerable amount of money to take advantage of local avails, and even then there was no guarantee that the operator would make a profit.

“Even if I spent $10,000 to $20,000 on a headend, how am I going to do it?” Hooks said. “I probably can’t sell the national stuff. So I’m going to go knock on the doors of the few small businesses I have in town? It probably wouldn’t pay for the salaries to do it.”

With Blue Vista, the upfront cost is small enough to make it economical for smaller operators, Hooks said.

“It’s a great ancillary business that some of us haven’t been a part of as it relates to the big guys,” Hooks said. “I’m excited; I think it’s a great deal.”

Ryan said that Blue Vista is talking to other networks, and is in discussions with NBC Universal Cable — USA Networks’ parent — about making other networks available.

“Once we get this up and flying, we’re certainly looking at Sci-Fi, Bravo, all of the NBC networks,” Ryan said. “Our expansion plans are to do this with literally dozens of channels. Targeting the higher rated networks first certainly makes sense, just from advertising sales, but there’s that opportunity across the board.”

USA’S INTERESTED

NBC Universal Cable vice president of affiliate sales, field marketing and national accounts Brian Hunt said he is “definitely interested” in expanding the relationship with Blue Vista.

“We want to help all of our cable operators, especially the smaller ones which Blue Vista works with, to help them grow their ad sales revenue,” Hunt said.

The revenue stream NBC Universal Cable would lose by participating with Blue Vista is insignificant, Hunt added. More important, he said, is improving relationships with small cable operators.

“Literally, 97% to 98% of the country inserts local commercials on USA now anyway,” Hunt said. “When we have our local ad-avail cue tones, there is a couple of percent of the country that doesn’t insert because of technical issues or cost issues with the equipment.

“What Blue Vista does is provide an opportunity to take advantage of the local ad avails which they get anyway. It helps drive revenue for them, which helps offset programming fees that they pay us.”

Ryan said that he has received support from two small cable associations — the National Cable Telecommunications Cooperative and the American Cable Association — and hopes to have a deal with NCTC in the near future.

POLKA: SEEMS HELPFUL

“This solution should greatly help smaller ops,” ACA president Matt Polka said in an e-mail statement. “Network avails have been out of the reach of independent cable operators for far too long, and this plan will allow them to take advantage of an untapped new revenue stream.

“Given the significant programming [fee] increases our members face, this new plan should help to balance the effect of these annual fees,” Polka said.

“NCTC has spoken with Blue Vista, and we think members will be interested in the concept,” an NCTC spokesman said in an e-mail message. “At this point, we have no formal agreement in place, but will certainly encourage members who want to explore a new source of revenue to contact the company. As more networks are added to the business plan, we’re certain member interest will grow.”

September