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RICHARD COLE
When it comes to building customer loyalty, cable operators know there's no place like home - particularly for MSOs who can deliver a magic blend of community-based content via the Web or broadband TV that woos and wins loyal subscribers while generating advertising dollars.
"If I can go to a bass lure company and tell them, `I have 400,000 fishermen out there who are bass enthusiasts, and I can make sure your new bass lure is on the banner every time they pop up,' that has an enormous amount of value," says Jack Olson, VP-media development for Adelphia, which launches its first City Hits Web site in January in Colorado Springs.
The question is how a large a local net to cast in fishing for new customers and advertisers. While system size and resources are critical factors, cable operators are taking different approaches on how to maximize return from the high-speed connections they provide.
"The challenge is always justifying the cost," says Tom Adams, president of Adams Media Research. "We see more and more companies doing it, but many are treating it as a cost of doing business - they feel they have to do it, because someone else will."
Yet no one is in a better position than MSOs to make local content outlets work profitably, argues analyst Jim Penhune of The Yankee Group.
"One of the great advantages for cable operators is that they already have a local footprint in a community," he says. "They can roll out local content far more effectively."
Operators are taking diverse approaches in their distribution strategies. Many cable companies building local Web sites see them, in part, as a proving ground for interactive TV, a way to work out the bugs before pushing similar content onto a subscriber's television. Other companies, such as Insight Communications, are bypassing the Web entirely by providing localized ITV content through digital set-top boxes.
The type of local content operators choose to provide also varies.
Time Warner's New York 1 Web site uses in-depth local news coverage as its draw, while the Adelphia and Cox local Web sites feature news headlines and more service-based community information, such as car ads, weather and events listings.
Differences aside, operators agree on one thing: Customers care deeply about what happens in their own back yards, and their local cable operator is the ideal purveyor of that information.
"That's certainly one reason to go ahead right now and invest some money to see how it works - to get some sense of what the costs are going to be, what the problems are going to be," Adams says.
The struggle is to find a formula that allows companies to leverage current assets and attract enough eyeballs to get advertising and e-commerce dollars rolling in.
Adams' view that local news and streaming video are critical local lures is certainly the cornerstone of Time-Warner's approach with its New York 1 Web site (NY1.com). The site bristles with streaming video of warehouse fires, overturned buses or Mayor Rudolph Giuliani's latest press conference, with clips provided by the company's New York 1 all-news cable channel.
"The more recent and specific the news is, the better, and the more localized it is - the closer to the actual block people live on - the better," says NY1.com Webmaster Marc Nathanson.
Users with a dial-up connection can click on one button for the video and audio feeds, while broadband users using Time Warner's Road Runner service can access the material with a different button. The site receives roughly 1 million hits a month.
Once at the site, Web surfers can check the weather, read restaurant reviews, peruse local TV listings or get more generic tips on pets or parenting.
While Time Warner built NY1.com around its all-news outlet, Adelphia has no similar properties and instead is using its Adelphia Community Network channel as a model.
The Adelphia sites will not carry up-to-the-minute streaming news videos, but they will have headlines and stories from newspaper partners and national agencies in addition to regional weather and community information. Local organizations may control their own section of the site, Olson adds, such as an area for the school district to update educational information and events.
To give the sites a leg up, Adelphia's high-speed Internet customers will find their connections defaulting to the local City Hits site, Olson adds.
Cox Communications, through Cox Interactive Media, is already running Web sites along a similar line in several areas, including Arizona, San Diego and Orange County. The Orange County site, OCNow .com, opens up with a series of links such as "Autos," which takes the user to Auto .com, and "Entertainment," which touts a Civil War re-enactment at the Nixon Library, along with free e-mail, local weather forecasts and a singles message board. Other than the local content, the site for each cable system is virtually identical.
Cox provides front-page news headline links, but they are not prominently displayed. The MSO's high-speed users see the sites differently, a company spokeswoman says.
Charter Communications, in partnership with Digeo, is building its local Web sites and interactive TV channels in parallel, although software problems have held up the effort, says spokesman Andy Morgan.
"We're still in a position now to roll out a PC portal by the end of this year, and the TV portal is slated for the second quarter of next year," he says. Charter's first Web portal is slotted for Johnstown, Penn., while the interactive TV channel will debut in St. Louis.
The company is reluctant to discuss details for competitive reasons, but he says they will include e-mail, news, weather and other local community content. The Web sites will support streaming video, while the ITV channels will have an ad component, Morgan adds.
"You push a button on a remote, and a menu comes up on the screen, reducing the size of the picture," he says. "You can personalize that menu for your preferences, and as part of that menu, you have advertising."
Viewers who "drill down" deeper into the menu will find more specialized ads, depending on their interests, he says.
Meanwhile, Insight Communications is skipping local content on the Web by focusing instead on localized ITV services through digital set-top boxes. Working with Local Source, Insight already has five ITV channels servicing communities in Ohio, Indiana and Illinois.
"Through research, we've found 70% of people still don't use the Internet on a day-to-day basis, so we offered to really pioneer this service onto the television platform," says Colleen Quinn, SVP-corporate communications.
The Insight ITV system adopts a walled garden approach, so that viewers don't have direct access to the Internet but stay within Insight's system. A menu pops up when customers turn on the TV, and, using an ordinary remote, they can choose to immediately "Watch TV" or go to "Local Source," where they will find an array of content from their own community. Maneuvering is easy, she says, and the screen is designed to be read from 15 feet away.
Only one person per system is required to update local content by compiling the information and feeding it to Local Source, which in turn puts it on the channel.
"For example, you're able to browse through all the listings for restaurants in the area, and from that you can click on specifics on type of food and then click on specifics of the menu offered that day," says Quinn. You may be able to listen to an audio feed of the chef describing the day's special, she adds.
Kids may not be thrilled with one feature available to local schools, Quinn warns:
"With this system, you can get information on your child's school and what homework his teachers have assigned that day."
While cable operators are reluctant to discuss costs of their interactive Web and TV sites, the startup costs are certainly high enough to freeze out many smaller companies. CableOne, for example, says that at an average of 20,000 customers per system, local sites are simply too expensive.
Operators are in various stages of figuring out how to generate revenue from their local offerings.
On Time Warner's New York 1 site, e-commerce links or even banner ads, other than Time Warner entities, are noticeably absent. That will come, Nathanson says.
"We basically wanted to see, over a period of time, how things shake out before expanding the site with partnerships that would allow merchandising, e-commerce, that sort of thing," he says.
Another complication, he acknowledges, is the sheer size of Time Warner, which slows down negotiations with local merchants.
The NY1.com model clearly pleases Time Warner, despite the apparent dearth of revenues to date. The company is replicating the format to develop local Web sites to complement its two new North Carolina all-news channels.
If NY1.com epitomizes the traditional Internet "build it, and the money will come" approach, Adelphia's City Hits Internet sites represent a tighter focus on the bottom line.
"They are intended to be very locally branded sites, which will have an enormous amount of similarity in terms of templates, user experience, and which we can customize on a market-to-market basis," Adelphia's Olson says.
A number of local advertisers have signed up for the service's launch.
"We really see the big part of this market for us - in terms of generating revenue and relevance for the retail side - as the small and mid-size business," Olson says. "They almost unanimously feel a compulsion to become part of (broadband) soon. We will deal with that for them. We will heavily market the site."
Services for, say, a flower shop that signs on as an advertiser will range from simply listing the company to providing maps and directions, Web page links, e-mail and product lists that will allow a customer to order roses on the City Hits site.
Visitors to the site will be surveyed about their particular interests so the site can be customized to those interests both in content and in rotating banner ads. This approach compliments Adelphia's national advertising strategy, allowing the MSO to aggregate those users across its systems and to win advertisers with a cross-platform strategy.
So far, Insight hasn't sold ads around its service, but it is considering a "mall TV" approach, Quinn says.
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