So You Wanna Be a Cable Network. . . : With millions of dollars at stake, a swelling number of video venturers are battling for slots in the ‘toughest start-up environment’

Bernie Weitzman’s schmoozy cadence accelerates as the Beverly Hills television producer warms to his favorite topic.

“We’ve got the comedian Marty Allen doing a show for us called ‘Matchmaker,’ which will get older men and women together for a little romance,” he reveals, exuding the enthusiasm of a true believer. “Debbie Reynolds is extremely interested in doing a talk show for us. . . . These are the type of entertainers our audience is very anxious to see and to talk to.”

People older than 50 “are great bingo players,” Weitzman says, “and we’ve got ‘Satellite Bingo.’ They can call in and win some big money. They’re going to love it.”

Weitzman is convinced that millions of viewers will love the new Senior American Network that he and his partners say they’re launching on cable TV systems across the country in January.

Other entrepreneurs are just as certain that there’s a market for new channels entirely devoted to court proceedings, career advancement, science fiction, self-help projects, talk shows and even “cowboy” programming.

These services are part of a bumper crop of new video ventures clamoring for admittance to an already overcrowded cable marketplace. It’s a safe bet, industry experts say, that few will make it to the air.

“This is probably the toughest start-up environment I’ve ever seen,” declares Larry Gerbrandt, vice president and senior analyst for Paul Kagan Associates Inc., a Carmel-based media research and investment firm. “Even in an average year, only a couple of new networks actually get launched.”

A dozen proposals for new national cable services have been unveiled during the last six months, despite the fact that a large percentage of the nation’s cable systems have hung up “no vacancy” signs. Those systems have their hands full trying to deal with the 69 national cable networks that already exist, according to the National Cable Television Assn.

The congestion has become so overwhelming that two of the industry’s latest program offerings, each backed by an estimated $80 million, have been holding merger talks in an effort to survive. The Comedy Channel and HA-TV are each available to only about 8 million of the nation’s 60 million cable-wired households, far less than the 20 million to 25 million homes that analysts believe an advertiser-supported (or “basic,” in industry jargon) network needs to break even.

Even industry veterans have been surprised at these low clearances, because the two channels are backed by cable industry giants--Time Warner (parent of HBO) behind The Comedy Channel, and Viacom (parent of Showtime, MTV and Nickelodeon) behind HA-TV. The feeling is that if these billion-dollar media firms don’t have the clout to bring off a successful network launch, nobody does.

“The Comedy Channel is only available to 1.8 million of our 4.4 million subscribers, even though it’s our own product,” laments a spokesman for American Television Corp., which is owned by Time Warner. “It’s obvious that there’s not room for two comedy networks.”

What isn’t obvious is whether there’s room for even one.

Even if there were enough advertising to pump life into all the proposed new services--a dubious proposition at best--the problem for most cable companies is that their channel space is already occupied by over-the-air stations, mandated public-access channels and such well-established, high-demand cable channels as ESPN, CNN, Nickelodeon and the USA Network. Although newer cable systems offer 54 channels or even more, the fact is that more than half of the nation’s nearly 8,500 cable systems still can carry a maximum of only 36 channels. Thirteen percent carry fewer than 20.

“There is a tremendous capacity issue,” says Lela Cocoros, communications manager for Denver-based Tele-Communications Inc., which, with 5 million subscribers, is the nation’s largest single multiple-system cable operator. “There are already so many services out there . . . that there has to be tremendous clamoring by viewers for whatever will fill those precious few spaces on a line-up.”

What’s more, many systems have frozen plans to rebuild their facilities and offer an expanded channel lineup, saying that bank financing is too precarious with federal rate regulation looming in Washington.

More than a dozen bills have been introduced in Congress that would bring back regulation, spurred by consumer complaints and a General Accounting Office study that reported a 39% hike in basic monthly cable rates in the period between 1986 deregulation and the end of 1989. The National Cable Television Assn. opposes the measures, arguing that rates were kept artificially low before deregulation, but on June 7, the U.S. Senate Commerce Committee approved a bill that would set a ceiling on how much cable operators can raise their monthly subscriber fees.

“We’ve been spending $100 million a year since cable deregulation on capital expenditures like upgrading our systems to 54 channels,” says Mark Nathanson, chairman and chief executive of Falcon Cable, a Los Angeles-based operator serving 800,000 subscribers in 29 states. “We’re thinking of cutting way back this year to $10 million. Why? Because of the credit crunch, the financial problems banks are having and the uncertain regulatory environment.”

As a result, many of the 500 communities served by Falcon “have no empty slots available and have put a lot of scheduled rebuilds on the back burner.” An eager supporter of “as many program choices as possible,” Nathanson says that Falcon simply can’t afford to expand until the company knows who will pay for it.

Given such a congested and unstable environment, why would anyone even think about launching a new cable network?

“We simply think it’s a good idea,” shrugs Beverly Harms of Communications Equity Associates, referring to test-marketing of the company’s How-To Network this fall. “If you sit and wait, the shelf-space keeps getting filled up and you get farther and farther out of the loop.”

“The longer we outsiders wait,” echoes Mitchell Rubenstein, president of The Science Fiction Channel, “the more expensive the (satellite) transponders (used to distribute programming) will become. If we launch next winter, we think we can break even by the mid-’90s.”

Harms says the How-To Network is motivated by the success of “This Old House” and other home fix-up series on public television, plus the growing popularity of instructional videotapes. Her service would excerpt segments from tapes that demonstrate, for instance, how to repair a leaky faucet “and then use a soft-sell to explain that a full-length video is available by calling a 900 number.”

Other entrepreneurs are convinced that devoted audiences anxiously await their equally specialized fare.

“It just hit me that this was a great concept,” says the Science Fiction Channel’s Rubenstein. “It’s just a fun network with great fan appeal.”

“We feel there are an awful lot of cowboys out there,” Mack Long, president of the Austin-based Cowboy Network, told a reporter inquiring about the need for a ‘round-the-clock Western-themed service.

But even investors in the concept agree that there probably aren’t enough interested viewers to support the two proposed channels devoted to real-life court proceedings: In Court and American Trial Network.

“There is such a constraint for new basic cable networks that we felt we had to go to daytime-only hours,” says Rainbow Programming President Sharon Patrick, explaining her company’s recent decision to halve the 24-hour daily In Court feed, which is set to begin this fall.

“It’s a crap shoot, but it can be a measured crap shoot,” she asserts.

American Trial Network was conceived by American Lawyer editor Steve Brill, who last year sold a majority stake in his magazine to Time Warner. “It makes no sense to talk about (the project) while it is in development,” he says. But Time Warner has reached agreements that would allow test-marketing of the service, to begin as early as this summer on cable systems it operates in New York City--with a national roll-out possible by the end of the year.

Although officials at the competing services discount such speculation, many industry observers predict an eventual merger between their courtroom channels.

Some sort of partnership also may emerge from recent talks involving The Family Channel, which schedules lots of Western movies, and The Cowboy Channel, a proposed montage of country music videos, rodeo coverage and reruns of such vintage TV series as “Gunsmoke” and “Wagon Train.”

Striking out on their own are the Monitor Network, Career Television Network, Talk TV Network and Senior American Network.

“We’re probably going to change ‘senior’ to ‘golden’ to take a little sting off the term senior,” volunteers Bernard Weitzman, who heads a group of former broadcasters financing the latter service.

“Our philosophy is that if our programming is good and there’s a need for it, we’ll find the air time,” says Weitzman, maintaining that the concept has received “a phenomenal reception” among cable operators.

But it will take much more than enthusiasm to make such new services viable, given the cautiousness of today’s cable operators.

“As an industry, I’d like to see us offer as many programming opportunities as we can,” says Lou Borrelli, senior vice president of Dallas-based Marcus Communications, which serves 18,500 rural Wisconsin cable subscribers. “However, we are not in a position to make channel space available for each and every service that comes down the pike. They have to be added based on demand.”

(In an effort to create just such a demand, HA-TV recently has been running radio commercials in Los Angeles encouraging listeners to call their local cable company to request the comedy service.)

Borelli notes that his roster of cable product is not engraved in stone and that he periodically polls customers on what services they’d like to see dropped or picked up. Through such tinkering, subscribers who are bored can often be convinced to renew.

“We like to do things that are innovative and interesting,” agrees Kim Cole, director of administration for Sonic Cable, a seven-system operator based in Walnut Creek, Calif. “But in order to add a channel, we have to take something off or carry it part-time with other channels.”

A possible long-term solution to the current bottleneck involves program sales to direct-boradcast satellite (DBS) services, which have a spotty record in this country but are gradually gaining viewers in Europe, Japan and Australia. Media mogul Rupert Murdoch and NBC recently announced plans to jointly launch a 108-channel American DBS service called Sky Cable within the next several years that could be picked up by napkin-sized satellite dishes. Such ventures may eventually serve the estimated 15 million to 20 million U.S. households that will remain uneconomical for cable firms to wire, and they could even challenge cable for the subscribers it has now by delivering so many more program choices.

In the meantime, the difficulties and long odds of launching a new cable service are outweighed, for many, by the potential rewards. “A successful, second-tier cable network (such as Lifetime, Nickelodeon or Arts & Entertainment) these days can be worth $500 million,” analyst Gerbrandt estimates. “We think networks like CNN, TNT, ESPN and USA are all worth upwards of $1 billion.”

Given that financial potential, Gerbrandt concludes, the minimal costs of announcing a new network, packaging a slick media campaign and securing a booth at an industry convention “are relatively cost-effective market research. So if you don’t get enough people interested the first time around, you just fine-tune the concept and come back again next year.”

CABLE HOPEFULS: Twelve proposed services, Page 89.