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How Scary Can Pushing a Linear Channel Be?

Launching a new cable network can be like a roller coaster
ride, with lots of breathtaking highs and lows and surprising high-speed turns.

So it's appropriate that FearNet has hooked up with Six Flags Entertainment
Corp. on a promotion that puts signage for the network next to one of the most
thrilling rides at each of the company's 10 theme parks. FearNet will also be
promoted on jumbo screens and marquees at Six Flags.

The general promotion is unusual for Fear- Net, which has used its resources
mainly when it gets launched by a distributor or when it premieres new
programming, according to Peter Block, president and general manager.

The horror genre gives FearNet a pretty dedicated community of viewers. But
FearNet now must try to attract a broader audience because it is embarking on
one of the industry's scariest rides by trying to build a linear channel on the
back of a VOD network. That trick has been successfully done so rarely that
it's frightening.

FearNet, owned by Sony Pictures Television, Lionsgate Entertainment and
Comcast, launched in 2006.

"The VOD landscape looked very exciting when FearNet launched," says SNL Kagan
analyst Derek Baine, who couldn't recall a successful transition from a VOD
network to a linear one. "There has been no license fee and very little ad
revenue. So they just don't have the programming budgets of typical linear

Having Comcast as a part owner could be a powerful asset, Baine adds. "If they
give it a wide rollout, it could be successful based on that alone," he says.
"I doubt that they are making any money on this now, but if Comcast gives them
a national rollout it could be pro! table."

But Block, who joined FearNet two years ago, says so far, so good. FearNet's
foundations are its ranking as the No. 1 free VOD movie provider, with 640
million views since it started, according to Rentrak, and the top genre site
online, according to comScore. Block expects the linear channel to be in 10
million homes by year-end.

The linear programming is different than the on-demand product, which is mainly
uncut for hard-core fans seeking the theatrical experience. The linear
programming complies with content rating demands and contains commercial breaks
with programs that are scheduled to start at the top of the hour.

"There are people who want to taste, but not order the whole entrée," says
Block, who is also a well-known producer of horror films, including the Saw
franchise. "It allows us to give people movies that they otherwise wouldn't dare
to see in a familiar format that they will feel comfortable with." And with the
most shocking bits cut out.

The linear network is also designed to be fun, including its original program Holliston, which is a sitcom.
"Since we don't have broad enough distribution to get huge advertisers yet, we
also don't have to cater to anybody," Block says. "So if we feel like doing a
stunt where we put three really weird esoteric movies on together on the same
day because it makes sense to us and it will please some people, we can do it."

Is FearNet a good business? Block says the channel makes money but would love
to spend more on original programming and promotion. "If we were executing a
different business plan, I might have to say to you, ‘No, we're not making
money, but we have all these shows and all this great advertising,'" he says.
"I don't know which story is better, but our owners certainly like it the way
we're doing it."

Meanwhile, a new programming block is on the way. And Block is also hopeful that
with the advent of dynamic ad insertion, VOD advertising will become a more
meaningful revenue stream. Until then, he says, FearNet will continue to
underpromise and over-deliver.

FearNet's current advertiser base consists mainly of companies in the motion
picture, DVD and video game businesses. Video game company Capcom, which makes Resident Evil, is both sponsoring
FearNet's presence at Comic-Con, and making a big linear buy as well. But Block
says media buyers and advertisers can't seem to grasp the fact that FearNet
viewers also "drink soda, drive cars and wear clothes."

Horror is a popular television genre. Faye Walker, the FearNet VP of marketing
who came aboard three months ago, asked Nielsen to look at horror programming
and found that 91 million people tuned in to shows in the genre on broadcast
and cable networks this season including The River, The Walking Dead, Supernatural, The Vampire Diaries, Fringe, American
Horror Story
, True Blood, Teen Wolf, Grim and Dexter.

"Virtually every major broadcaster and every cable channel is catering to our
audience right now," Walker says. "The audience wants this entertainment and as
we gain in distribution, they're there. They're very vocally there with us
right now." And not only are they vocal, they're also well connected via social
media; for fans, the horror genre can be a lifestyle, Walker adds.

"They're very rabid. They congregate at festivals and there's a lot of
conventions that are in our wheelhouse. They're just tons and tons of online
sites and communities," Walker says. "We're going to be starting a series of
digital promotions and digital campaigns, really aggregating our fan base to
Facebook and other social platforms. And we have the No. 1 genre site, and oh,
by the way we're a linear channel. So it's very easy to reach out and touch our
audience in a way that I think most networks can't."

Ironically, Comcast, a source of the majority of FearNet's VOD homes, has
launched the linear network in relatively few homes. FearNet's current fee for
operators covers VOD, linear and authenticated online services. "Most systems
want both channels," Block says. "I think you'll see that gap [between VOD and
linear homes] closing over time."

Comcast also owns Chiller, which SNL Kagan's Baine sees as a competitor, even
if Block doesn't. Baine says Comcast is testing the linear FearNet in
Philadelphia and might be looking to see how it stacks up against Chiller: "If
they are viewed by operators as very similar there isn't going to be much
incentive for an operator already carrying Chiller to agree to carry FearNet."

Block says his channel serves horror fans, while Chiller exists to monetize
parts of the NBCU library. "I'd love to have their subscribers," he says. "I
think it's like the difference between McDonald's having ice cream and
Häagen-Dazs having ice cream and I think we're Haagen-Dazs."