The Lessons of Voom
What can the industry learn from the mistakes made by
Cablevision's satellite TV service? By Phillip Swann
Washington, D.C. (January 19) -- Voom is getting closer to doom.
Cablevision's board of directors this week decided that it would attempt to sell its
struggling satellite TV service. If the service can not be sold soon, the odds are good
that Cablevision will simply pull the plug. Voom, which launched more than a year
ago, has less than 30,000 subscribers despite an ambitious lineup of nearly 40
High-Definition TV channels. And The Wall Street Journal reported today that
Cablevision's board ordered management to immediately reduce spending on the
service, a likely signal that it will be closed if it's not sold.
What happened to Voom? Any why did Cablevision spend hundreds of millions of
dollars to launch the service?
As Cablevision proceeds to wind down the venture, it's a good time to look at the
lessons that can be learned from its failure.
Lesson #1:
Think Twice -- No, Three Times -- Before You Challenge the Establishment
Chuck Dolan, Cablevision's founder and chief Voom supporter, should have known
better than anyone that existing cable and satellite companies have a virtual lock on
the market. In the case of the satellite industry, which Voom dared to conquer,
DIRECTV and EchoStar now have nearly 25 million subscribers and a decade's
worth of experience and consumer recognition. There just isn't room for a third
player; Voom was a long shot from the beginning. The only way it could have
succeeded was to offer something that DIRECTV and EchoStar could not.
Lesson #2:
If You Want to Be Niche, Don't Spend Money Like You're Rich
Dolan must have understood lesson #1, which would explain his decision to market
Voom as a High-Definition TV service. DIRECTV and EchoStar now offer less than
10 high-def channels so Dolan concluded that Voom's heavy HDTV lineup would be
a magnet for the growing audience of HDTV owners. The problem, however, is that HDTV is not growing at the pace that Dolan and others had anticipated. There are
roughly 11 million HDTV homes in the United States, hardly an audience large
enough to justify spending hundreds of millions of dollars. If Dolan wanted to market
Voom as a niche service, he should have started with a conservative budget and then increased spending when more people bought HDTVs. However, he spent money on Voom as if the entire country was on the verge of buying a new set. (And
he's asked Cablevision's board for even more money!) In football, it's said that
you "outkick your coverage" when you punt the ball too far downfield, which permits the return team to set up a big run. Similarly, Dolan outspent his audience, leaving
Cablevision vulnerable to charges that the company has built a service whose supply may never meet demand.
Lesson #3:
Be Careful When Traveling In Foreign Territory
Cablevision -- and Dolan -- knows cable. There's no question about that. However,
the company seems to have underestimated the market forces that make the
satellite TV industry a trickier proposition. Unlike cable, which has a virtual
monopoly in most cities (many people subscribe because it's the only way to get
their local stations without a snowy picture), the satellite industry doesn't have the benefit of being partners with local governments who promote their service at every opportunity. Consequently, they have to work overtime to attract subscribers,
building massive retail units and spending millions of dollars on national advertising
campaigns. But, today, Cablevision's top executives and board members seem
surprised that the Voom venture is so costly.
Of course, this development is not uncommon in the business world. Many
companies, flush with success and profits, suddenly believe they can conquer a
different category or industry. For instance, the telephone companies are preparing
to launch TV services of their own. However, history shows that success in one industry does not often transfer to another. Just ask the fellow who persuaded Harley Davidson to make a wine cooler in the 1990s. What's that? You can't find a Harley Davidson wine cooler at your local supermarket?
Lesson #4
Be Wary of Those With Cloudy Vision
Many great leaders are visionaries. They see trends before anyone else, enabling
them to move their companies in the right direction at just the right time. However,
vision can be arrogance in disguise. In Voom's case, Chuck Dolan persuaded
his company that his vision was clear when it was actually clouded with arrogance.
He ignored all the warning signals and he believed his view was unassailable. Unlike wise visionaries, he did not heed the advice of others and alter his course when necessary.
And now, it's too late.
Phillip Swann, president of TVPredictions.com, has been quoted on TV technology
in dozens of publications and by broadcast outlets, such as The Chicago Tribune,
The Hollywood Reporter, Fox News and CNN. If you would like to contact Mr.
Swann, he can be reached at 703-505-3064 or at
Swann@TVPredictions.com.
monitoring what the heck is going on here.
:shocked 
