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CMT Does Two-Step Over to Digital

11/28/1999 7:00 PM Eastern

Facing cable-system capacity constraints and increased
competition from Great American Country, CBS Cable's Country Music Television has
agreed to launch on digital tiers in at least three markets.

CMT, which launched in 1983, was included in the
digital-cable packages Time Warner Cable began marketing this month in its Houston and
suburban Milwaukee markets.

CMT is the oldest channel in the package, joining such
newcomers as CNNfn, CNN/SI, Speedvision Network, The Outdoor Channel, The Golf Channel,
The Health Network, Style, Food Network, BET on Jazz and Discovery Communications
Inc.'s four digital channels.

CMT is also included in another operator's
digital-cable package, but CBS Cable wouldn't name the operator because its digital
launch hasn't been announced, a spokeswoman said.

CBS Cable would prefer to secure analog distribution for
CMT, but executive vice president of sales and marketing Lloyd Werner said he'd
accept digital carriage on a system if he were not able to pick up analog positions.

"My philosophy of distribution has been to take the
best you can get," Werner said. "I don't want digital carriage if I can
avoid it. But if that's the only way to play the game in a dozen markets or so,
I'll do that."

CMT hasn't struck any carriage deals in markets where
cable operators dropped it in exchange for GAC, Werner said.

CMT has lost 5 million subscribers since GAC began offering
cable operators cash payments in exchange for carriage in 1997, dropping to 37.9 million
cable subscribers, according to Nielsen Media Research estimates for November. It is still
far ahead of GAC, which counts 11.5 million subscribers.

Werner wouldn't discuss terms of the carriage deals
he's pursuing for CMT, but he suggested that he's willing to follow GAC's
strategy of offering cable operators launch fees.

"There's no question about the fact that
GAC's financial inducements have forced us to rethink our marketing strategy, and we
are trying as best we can -- without ruining both our business plans and the business
plans of our customers -- to meet the market [demands]," Werner said.

CBS Cable expects CMT to pick up 5 million to 7 million new
subscribers next year, 95 percent to 96 percent of which will be through analog
distribution, he added.

GAC's current subscriber base doesn't include any
digital carriage, but Jones International Networks president Jeff Wayne said he expects
that to change next year.

"Distribution is distribution. We'd love to be on
channel 4 on analog everywhere, but the realities are such that that's not
possible," Wayne said. "Certainly, [digital] is better than nothing, and over
time, it will become very important."

GAC has picked up 4.3 million subscribers this year, mostly
from carriage deals with Comcast Corp., MediaOne Group Inc., AT&T Broadband &
Internet Services, R&A Management LP and the National Cable Television Cooperative,
Wayne said.

Third-quarter revenue for Jones'
television-programming operations -- which consist of GAC and Product Information Network
-- jumped 60 percent to $6.6 million. The company attributed the jump to increased ad
rates.

September