Oxygen Media Faces Cable TV Resistance
Women's Network Prepares To Launch, With AT&T Among Its Few Carriers
By LESLIE CAULEY And JOE FLINT
Staff Reporters of THE WALL STREET JOURNAL
(January 31, 2000)
As Oxygen Media Inc., a cable-television network aimed at women, prepares to launch service this week, it faces stiff resistance from what may turn out to be its toughest audience - cable-TV operators.
The network, based in New York and headed by Geraldine Laybourne, former president of the Nickelodeon cable network, likely will launch with six million to seven million subscribers. AT&T Corp., one of the few cable companies that has agreed to carry the service, said its contribution will be about three million sub scribers, though Oxygen said AT&T's contribution is closer to four million subscribers. Ms. Laybourne, for her part, said she isn't sure about the total number of subscribers. "It's like nailing Jello. It's a moving target," she said. Nonetheless, Oxygen said it will have 10 million subscribers within two months.
But even 10 million subscribers is a modest base, considering the near-constant stream of fawning media during the past year. The buzz helped raise expectations that Oxygen, whose backers include television personality Oprah Winfrey and TV-hit maker Carsey-Werner-Mandabach Co., would be a slam dunk.
But as of late last week, Oxygen was still hustling to sign up cable operators and getting few takers. AT&T, Basking Ridge, N.J., and MediaOne Group Inc., Englewood, Colo., which is in the process of being acquired by AT&T, have agreed to carry the network on a limited basis. So has Insight Communications Co., a small New York partner of AT&T. Charter Communications Inc., St. Louis, the cable company controlled by software billionaire Paul Allen, also plans to carry the service on a limited basis. Mr. Allen is a minority investor in Oxygen.
Hope for Time Warner Deal
Most of the other big cable operators, including Time Warner Inc., Comcast Corp. and Cox Communications Inc., are taking a pass for now. Oxygen suggests Time Warner's pending merger with America Online Inc., Dulles, Va., a limited investor in Oxygen, might help the new network land a big programming deal with the cable giant. But others in the industry aren't so sure, noting Time Warner even turns down requests by its own programming unit, Turner Broadcasting.
The industry's lukewarm response can be attributed in large measure to Oxygen's contractual demands, which some cable executives view as unrealistic. For starters, Oxygen is insisting it be carried on "expanded basic" cable service, alongside such cable heavyweights as Cable News Network, MTV and ESPN. Cable operators don't have enough room for proven hits, much less unproven ones, on their basic lineups. New programmers often have to pay-$5 or more a subscriber isn't uncommon-to muscle in on the expanded basic tier.
Oxygen, however, wants cable-TV operators to pay to carry Oxygen, not the other way around. According to people familiar with the matter, Oxygen is charging cable operators 18 cents to 20 cents a subscriber to carry the fledgling network. As a sweetener, it also has offered some cable operators warrants to help offset those payments and a limited period of free programming.
Negotiations at times have turned testy. Several cable executives said Ms. Laybourne has suggested Ms. Winfrey would use her popular daytime talk show to lambaste cable companies that don't carry the service.
Charges of Hostility Denied
Ms. Laybourne, in an interview, said she is "not trying to be hostile" to cable operators. "I can't imagine Oprah saying, 'Call your cable operators,' and being a nuisance," she said. Ms. Winfrey declined to comment for any aspect of this article.
Oxygen's on-air talent has been called in to bolster distribution. In an incident confirmed by her spokeswoman, former sitcom star Candice Bergen, who will host an Oxygen talk show, recently was deployed to "schmooze" her former college pal, Jim Robbins, Cox's chief executive. Her mission: to get Cox to carry Oxygen on its systems. It didn't work.
Oxygen has snared some deep-pocketed backers, including AOL, which so far have been able to provide more than $200 million in seed money. Ms. Laybourne said her company hopes eventually to raise $450 million, "the total amount we need to raise before we break even." At this point, however, her track record as a cable innovator doesn't seem enough to win over cable operators. It doesn't help that Oxygen's biggest cable backer to date, former AT&T cable head Leo Hindery, recently moved to an Internet company. In his former rote, it was thought Mr. Hindery would help persuade other cable operators to sign on.
Ms. Laybourne said she isn't worried. "For all the attention we've gotten when we haven't even launched anything, I think it's pretty clear that we can rally big groups of people and get them interested in what we're doing," she said. "Cable operators know, at the end of the day, that they really haven't connected with women."
It isn't clear at this juncture, however, that even Oxygen will connect with women. Oxygen executives, led by Ms. Laybourne, have promoted the network heavily as "the first and only network to combine advocacy, technology and creativity for a single purpose. " But some crit ics found a number of concepts in its lineup, previewed recently, to be stale. Shows include "Inhale," a yoga showhardly something new on TV-"Pajama Party," basically a televised pajama party with a variety-show tilt, and "Trackers," which, according to Oxygen, "celebrates teen-girl power."
Even an Oxygen show featuring Ms. Winfrey, "Oprah Goes Online," which shows the talk-show host trying to learn how to use a computer, raised critics' eyebrows. Since the sophisticated Ms. Winfrey has had her own Web site for five years, the concept didn't ring true. If Ms. Winfrey "has a computer in the house, she probably knows how to do that," said a TV critic. Ms. Winfrey, for her part, didn't show up for the preview. Oxygen executives said she was busy.