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Ad-Insertion Companies Branch Out

Digital ad-insertion vendors are not only continuing their
shift to smaller cable systems, but broadening their business horizons, as well.

Just as cable operators are ever on the lookout for new
revenue streams, so are their suppliers. On the insertion side, many companies unveiled
their new business plans while exhibiting at the Cabletelevision Advertising Bureau's
Local Cable Sales Management Conference in Denver earlier this month.

SeaChange International Inc., for example, besides
continuing to pursue growth opportunities outside of the United States, recently unveiled
a partnership with WorldGate Communications Inc. The venture will enable advertisers to
link their commercials to related Web sites by adding WorldGate's
"HyperLinking" technology to SeaChange's insertion systems.

In addition, SeaChange unveiled its first
traffic-and-billing (T&B) product at the conference.

And its executives see continued sales growth for its
long-form insertion system for infomercials, its hotel near-video-on-demand equipment and
its "Spot Pro" insertion system for television-station clientele.

SeaChange made a "huge" investment in T&B,
said Chris Scanlan, the company's vice president, adding that he believes that the
potential for integration with SeaChange's insertion technology will drive its
T&B sales. Eight operators had already bought it prior to the CAB show.

Still, he acknowledged that it will be an uphill battle
versus category leaders Columbine JDS' CompuLink and CCMS Inc., which command a
combined market share of 80 percent to 90 percent, Scanlan said.

The Windows NT-based T&B product enables operators to
manage all scheduling and financial aspects of ad sales through verification and, thus, to
maximize book-to-bill ratios, SeaChange said in its announcement. Per-site pricing for the
T&B hardware and software is based on the number of ad zones and channels, Scanlan
said, noting that the price ranges from $40,000 to $90,000.

John Molamphy, director of operations at DirectLink of
Oregon, and Richard Lewis, operations manager at Time Warner Communications in Orlando,
Fla., were among those lauding the "one-stop-shopping" aspect.

Molamphy said DirectLink may use the products not only for
ad sales, but for long-form local-access programming and pay-per-view.

DirectLink -- which is replacing a 10-year-old, tape-based
analog system to insert on 15 channels, up from seven -- expects to see a
"significant" uptick in ad revenues, said David Cole, its director of marketing
and sales.

After a four-year search, Time Warner also decided on one
vendor for insertion and T&B. SeaChange's "B" system will "support
us across our entire ad-sales business," managing spots across 60 channels in two
zones, including Central Florida News Network, as well as the Orlando Interconnect, Lewis

Other major clients include Charter Communications Inc. in
Los Angeles, which will manage inventory across 150 networks; MediaOne in Fresno, Calif.
(60 channels); and Marcus Cable Co. L.P. in Waterbury, Conn. (16 channels). Time Warner is
among MSOs that are mulling other T&B commitments.

Columbine JDS, meanwhile, has expanded its reach beyond the
sales side. In June, it acquired the "Adserve" and "Adtraq"management
software for ad agencies and media-buying services from Toronto-based KTS; that software
includes systems for media planning and buying, production control and traffic.


SkyConnect Inc. was acquired in mid-June by Online System
Services Inc. in a cash-and-stock deal worth $20 million. OSS now hopes to
"strengthen our high-speed Internet-access and online-services product" via
distribution to the insertion supplier's cable-operator clientele, said Steve Adams,
OSS' president and CEO.

SkyConnect said its insertion business remains strong, with
president and CEO Michael Pohl pointing out that the company ended its 1998 fiscal year
March 31 with more than $11 million in insertion sales -- more than double the previous
year -- and it began fiscal 1999 with a sales backlog of $10 million.

SkyConnect's sale was the second in the insertion
field in just over a year. IndeNet Inc. dealt Channelmatic Inc. to Local Insertion Media
Technology AB, a Swedish company, in March 1997.

Channelmatic, in its own new wrinkle, joined forces with
private-investment firm Anderson Pacific Corp. and Communicast Inc. to form Adpath
Television Network, a satellite-transmission service to sell commercial time on
small-market systems that aren't part of an interconnect.

Adpath will use Channelmatic's new low-cost
"Digital MoneyMaker" ad-insertion technology, while Communicast will handle
T&B using CCMS' software. Adpath will target national advertisers with this
latest one-stop, single-invoice venture, which will enable smaller operators that are not
yet inserting to generate revenue from inventory that might otherwise go unsold, Adpath
executives said.

Initial costs will top $4 million, including installation
of hardware in 25 unspecified beta-test markets; the test was expected to run over the
next three to six months, an Adpath spokesman said.


In a reverse of the marketing theme line from Godzilla,
insertion vendors now mainly target smaller operators because the major ones are already
heavily penetrated for digital insertion.

SeaChange earlier this year sold FrontierVision Partners
L.P. and Rifkin & Associates Inc.'s CableVision Communications on its "Spot
System," replacing tape-based systems at FrontierVision's Auburn, Maine, system
and at Rifkin's North Bay Village operation in Miami, both first-time SeaChange

The 53,000-subscriber FrontierVision system will now double
its insertable channels to 16, and Rifkin's 55,000-subscriber system -- the fifth
member of the Miami interconnect to choose SeaChange -- will expand from 15 to 24

Meanwhile, Channelmatic sold its MoneyMaker system to Cable
America's Cable Alabama, a 35,000-subscriber operator in Huntsville; and to Cable
Adworks Inc.'s 55,000-subscriber system in Chico, Calif. Priced at $4,000 per
insertable channel, MoneyMaker will enable the operators to insert on up to 24 channels.

Yet another supplier, Digital Video Systems, has been
calling operators' attention to its low-cost insertion system, "Catapult,"
at $3,995 per channel; and to its "DVS Enterprise" system (upgradable for
infomercials and NVOD), at $4,995 per channel.

At the same time, vendors have not totally forsaken larger
operators. Media General Cable recently began digital insertion on its 236,000-subscriber
system in affluent Fairfax County, Va. Because SeaChange's equipment has boosted its
insertable channels by four, to 24, Dwight Ward, director of operations at Mega
Advertising Inc., Media General's ad-sales unit, predicted "a significant
increase" in sales.

Earlier this year, both SeaChange and SkyConnect signed
Adelphia Communications Corp. At Adelphia's Media Partners ad-sales unit, Mac
MacGrath, Northeast region operations manager, detailed how the vendors are divvying up
that MSO's markets: SeaChange will install its equipment in Florida, Vermont, New
Hampshire, Massachusetts and upstate New York systems; while SkyConnect handles systems in
Virginia and Buffalo, N.Y.

Despite this year's shift in emphasis, Pohl pointed
out that larger MSOs remain a potentially lucrative market, since many will be seeking
replacements or upgrades to their current equipment over the next two years or so.

At SeaChange, James Kelso, manager of cable-video systems,
also expected that to happen, probably in 1999 and 2000.