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HITS Tinkers with Formula

Looking to provide more variety and to use bandwidth more
efficiently, Tele-Communications Inc.'s Headend in the Sky last week unveiled its
revamped digital-programming lineup.

The rejiggered HITS lineup, which takes effect July 28,
includes a number of additions and deletions of networks, and the addition of new urban
and Hispanic tiers. Also, HITS will be marketing 13 satellite transponders to operators,
rather than 12, including one carrying only the Your Choice TV time-shifting service.

There is also a new rate structure for HITS, which is
reportedly less expensive than the current one for affiliates.

The tweaking of the lineup, which debuted last fall, is
mainly in response to feedback provided by HITS affiliates in a survey, according to Rich
Fickle, HITS' senior vice president of business development. Getting carriage on HITS
is critical for any programmer looking to secure distribution for a new network, since TCI
is rolling out the digital-video platform across the country, and several-dozen other MSOs
are using it to expand their channel offerings.

The new HITS lineup will include ZDTV, the computer and
Internet network, as well as WeatherScan by The Weather Channel, a regional-weather
service. In a memo to HITS affiliates, Fickle also said HITS is in the final stages of
negotiating deals to carry Discovery Health, Discovery Wings, CNN/SI and America's
Voice, and they should be onboard in time for the launch of the new lineup.

The new lineup isn't totally completed, according to
Fickle, since negotiations are continuing with some programmers. More announcements will
be made before July 28.


But as of last week, several up-and-coming digital channels
were conspicuously absent from the new list, including Toon Disney, Lifetime Movie
Network, The Suite from MTV: Music Television and VH1 and Nickelodeon's four
digital/analog channels: educational kids' network Noggin, Nickelodeon Games &
Sports, Nick Too and digital East and West Coast feeds of the veteran kids' network.

HITS is currently negotiating with Toon Disney and Lifetime
Movie Network, Fickle said, but it "is not actively looking at The Suite, although
we're open to it." TCI owns TCI Music Inc., which includes music-video network
The Box, as well as the DMX audio channels.

In the revamped HITS lineup, DMX and The Box are gaining
additional carriage. DMX will be distributing 43 audio channels, up from 40, Fickle said.
Transponders 2 and 3 will continue to offer 10 DMX services, but an operator will be able
to add 20 more from just one transponder, 11.

In the future, HITS will look at Noggin, which doesn't
launch until January, Fickle added. MTV Networks itself is offering 10 digital networks --
The Suite and the Nick spinoffs -- on its own transponder.

Lifetime Television president Doug McCormick said he is
finalizing a deal with HITS for Lifetime Movie Network, and he anticipates being on the
new lineup when it debuts in July.

A Toon Disney spokeswoman said, "We're still in
discussions about being included. That [HITS] lineup is very fluid."

Fickle said a number of HITS-affiliate requests had been
addressed, including adding more programming and grouping more DMX audio channels together
on pods, rather than spreading them out on a lot of transponders.

"The affiliates told us that they wanted, obviously,
more new content that is unique for digital," Fickle said. "The variety
[special-interest] channels have been underrated [as drivers of digital]."

Several programming services that HITS said have received
significant analog carriage, and that therefore now "have less appeal for digital
tiers," will be dropped from the HITS lineup: Cartoon Network, Country Music
Television, Food Network, Adam & Eve and Encore WAM!. But Fickle said he is trying to
find a way to keep WAM! on. A sampler channel of health-related networks, Health TV, has
also been dropped from HITS.

Some of the updates to the HITS lineup have been previously
announced in a piecemeal fashion, such as the addition of ZDTV and the launch of a
Spanish-language tier from Liberty Media Group. But last week marked the first release of
the entire reworked HITS lineup.


In cleaning up the old lineup, HITS has eliminated the
duplication of several basic channels -- ESPNews, The History Channel, The Independent
Film Channel and ESPN Classic Sports Network -- that were being carried on more than one

HITS transponder 11 aims to appeal to a broad audience and,
in addition to 20 mainstream-music DMX services, it includes Discovery Civilization, The
Golf Channel, ESPN2, Speedvision, BOXPulse and BOXClassics. Discovery's new channels,
Health and Wings, are also expected to end up on that pod.

HITS is also carrying two additional digital-music-video
channels from The Box, BOXTejanos and BOXExitos, on transponder 12, which is
Liberty's "n Canales" Spanish-language tier. That tier, which debuts June
15, also includes Canal 9, CineLatino, CBS TeleNoticias, Discovery en Español, Fox Sports
Américas and eight DMX channels with Latino-oriented music.

The new HITS urban tier, on transponder 8, includes
Ovation: The Arts Network, AdulTVision, BOXEdge, BOXUrban, International Channel,
Kaleidoscope, BET on Jazz, Starz!3/BET Movies, Action Pay-Per-View and five-urban oriented
DMX channels.

Starting July 1, Viewer's Choice will program the PPV
channels carried by HITS that were previously programmed by Request Television, which is
going out of business June 30. The 27 PPV channels will remain on HITS in their entirety
until Sept. 1, when channels 9 through 27 will move to new transponders provided by
Viewer's Choice.

This means that come the fall, HITS will have two open
transponders, 5 and 6, to program, with nine to 12 channels per pod, according to Fickle.

"We may not fill that up right away," he said.
"We're trying to be cautious about what we add."

Viewer's Choice PPV channels 1 through 8 will remain
on HITS transponder 2, as well as being available on another Viewer's Choice
transponder. Viewer's Choice said it won't charge transport fees for the PPV
channels that it moves to its own new pods.


According to Fickle, the number of networks that are
footing the bill for transport fees for digital services has grown, meaning that they
"will be transport-fee-free to HITS affiliates."

Fickle added that HITS has created a new transport-pricing
schedule, "which should result in significant savings for our affiliates." That
new rate structure offers volume discounts based on the number of channels taken by a
cable system.

Currently, operators pay a flat rate of 3.5 cents per
network, per subscriber, per month in transport fees, Fickle said. Under the new plan,
rates will be based on the volume of channels that an operator takes. For the average
affiliate, rates will drop to about 2 cents per network, per month, going even lower as
they add more channels.

In the new HITS lineup, there are no changes to the first
three transponders -- the so-called three-pack -- that TCI systems are uniformly rolling
out. Fickle pointed out that most non-TCI HITS affiliates are taking five to 10
transponders, and not just the three-pack. HITS now has contracts with 36 MSOs, and it is
in talks with 15 others, Fickle said.