Terry Denson Wants Your House

having worked at both cablE operator Insight Communications as vp, programming and MTV Networks as director, business development for affiliate sales and marketing, Terry Denson, now vp, strategy and acquisition for Verizon's FiOS TV, knows his rivals and his programming partners from the inside out. Denson now is in the process of shaping FiOS' future as a genuine rival to cable via content acquisition; he's also overseeing the strategic rollout of an Internet protocol service platform for the entire home. That's where he sees the business going—and he's gunning to beat Comcast, Time Warner and Charter to the front door. MW: It seems the relationship between operators and programmers has become pretty acrimonious. How does Verizon take advantage of that?TD: In order to be successful, we've got to do two things well: create a positive relationship with the content providers by matching their key initiatives and then also delivering what consumers want most. On the consumer side, the value proposition is beyond just value in terms of just lower prices, but valuing what the consumer values. If the consumer wants more HD, we've got the most HD. If the consumer wants more VOD—with the exception of Comcast, to date—we've got the most VOD in the industry. We've got the most diverse channel lineup in the business and we have the simplest packaging. Whatever the customer values is what we're going after. MW: So what about your content partners?TD: One of the advantages that I had coming into the position is that I was a cable operator and, before that, I was on the programming side. I have a pretty clear idea as to what the key initiatives are for most content providers. We have an opportunity with the fiber technology to match up with those key initiatives and, to that end, really foster a better relationship with the content provider. Circling back to answer your question, yes, there's always going to be tension between the content providers and the cable distributors because they've got limited capacity. The almost unlimited capacity or unchallenged capacity that we have gives us a lot of moving parts when we talk to the content providers. That provides us with a better opportunity to match up with their key initiatives.MW: What are the service requests from your customers that you most need to heed?TD: On the consumer side, we start with the technology. The picture quality is great and the consumers are asking for more high definition, and we deliver all the high definition there is outside of Voom. So in each of our markets, we deliver the most high definition in the marketplace and consumers are still asking us for more. Kids video on demand remains a hot area and currently I believe we're the only distributor in the country that has kids on demand for both Nickelodeon and Disney.MW: Local franchising laws are starting to change in your favor. Do you see the franchising issue continuing to go your way?TD: I think that most states are going to consider statewide franchising when they see the product. The challenge that I've always put to those regulators is whether this is a product that your constituents would want to have the choice to have? They can select whatever one. If they think Charter is better than we are, fine. To each their own. But it's got to be an issue about choice for the consumers. I think what you are seeing is the result of having a meaningful competitor who puts a product in the marketplace that most consumers would want the choice to have.MW: How realistic do you think a permit to pursue a national footprint might be?TD: I think [Rep. Joe] Barton [R-Texas] feels pretty confident about the national franchising. There will be some sort of national franchising that everyone will be able to take advantage of—cable operators, overbuilders, in addition to the telephone companies. It seems likely right now for sure.MW: You have been pursuing cable operators' local programming. Will that strategy continue?TD: Obviously, the regional sports networks are important, and we've done a good job of securing most of the regional sports networks in our footprint. We recently filed a program access complaint against Cablevision because they refused to provide us with the regional sports networks that they own, so that's been an issue. Otherwise, we're actively pursuing—and been quite successful in securing—the content.MW: You recently closed a retrans deal with CBS that reportedly involved some cash payment. Is that going to be part of your agreements going forward?TD: I know there were some publications that reported cash payment. It's a complex deal, where the value proposition flows both ways. It's a contract, so there is consideration. Each of the deals we do—because everything is born anew, with us being a new entrant—have greater scope than just about anything done before. Whereas Comcast may have done a deal with Disney and then the next two and then the next two, we've got to do everything in one fell swoop, and that creates complex transactions. It also gives us an opportunity to again satisfy this notion of meeting initiatives, and that's helpful for our long-term success and our near-term success.MW: How do you unstick cable's "triple play" subs?TD: We've got a little bit of a triple play and they've got a little bit of a triple play [video, high-speed Internet, phone]. I think it's too early to tell what the real effect the triple play has on churn. I think in three to five years, where you have at least two meaningful triple-play offers in the marketplace, ours and cable, then the triple play in and of itself becomes a commodity. I'm not sure how long this stickiness will continue, but it's really an opportunity for the distributors right now to win the household, and that's really what the business is about. The whole household—that's the revenue growth opportunity for both cable, of course, and us as well.MW: What are your thoughts on the recent call for à la carte cable service?TD: We said, "Here's your value proposition: People want choice, and we give them choice." The way that we've organized our channel lineup is on a genre basis, so it's easy for consumers to super-serve themselves in the areas they enjoy most. We've organized on a demographic basis, so if they scroll up a little bit or down a little bit, they're more likely to discover something that is targeted toward their demographic that they might not have discovered before, and all that for 20 to 25 percent lower than the average cable bill. The question I would ask is, would à la carte be an issue if more people programmed like us? I think the answer is, probably not.MW: With the cost of sports and quality entertainment programming continuing to rise, will you continue to be able to offer cheaper service than cable?TD: Winning the whole house is where the business is. As long a we take a more holistic view in terms of securing subscribers, we'll continue to have the value proposition with respect to the video services and we'll do our best to keep our prices down.MW: Are there any programming or service differentiators that you would like to strengthen or acquire?TD: In terms of distinguishing ourselves, we're taking advantage of the IP [Internet protocol] platform. I think that really is a long-term strategic vision for us, and I think that's a way in which we can distance ourselves from the competition because really, in the IP world, what you're looking at is more content on demand. It doesn't have to sit on a server in a system; you can pull it from all over the place so you literally can have tens of thousands of titles without server- capacity issues. However, in order for that to even make any sense, consumer behavior has to continue to evolve toward viewing content on demand. You've got to get better search capabilities and then you've got to develop a user interface so that people can find the stuff.MW: Do you have a sense of when that tipping point might occur?TD: To me, it feels like it's a two- to three-year period.MW: Are there any competitive scenarios that keep you up at night?TD: The issues that concern me don't involve so-called network-base distributors, satellite and cable. I think for all the households out there and all the services that are being offered, there's plenty of business units and money to be had for everyone to have successful businesses. But if paradigms shift, I'm concerned about the device-centric distribution, whether it be content over a PSP or Xbox or whatever the next thing is going to be. If you can download your content directly to PSP and that content becomes more device-centric, or the Xbox becomes more device-centric, then people will have less of a reliance on network-based distribution. Likewise, the virtual network concept, the Yahoos and the Googles. If people become more reliant on those kinds of services, then it makes us less valuable in the marketplace, and that means two things: one, we may lose subscribers, and two, the prices for our services will necessarily have to come down.MW: How do you position FiOS for that world?TD: I think a lot of it is technical applications, content applications and services. Those are the things we look at systematically to say, "If you can get it from us—if you can get CBS network content on demand from us," then that's one way in which we can keep those other competitors at bay. Take, for instance, when Google aired Everybody Hates Chris. That actually ran before the episode aired on broadcast, and then it was available thereafter on demand. Well, if we make that same service available, then more people are going to watch it on the television than are actually going to go to their computer. The way it was set up with Google is, well, you might do it at work, but you might actually be sitting in your living room and decide: I heard about this Everybody Hates Chris thing on Google; I'm going to go upstairs or over to the desk and I'm going to watch it. And then they start to draw you in and then next thing you know, there's a baseball package that pops up and it's like: You know, I can get all my baseball games right here on the computer.MW: March Madness this year seems to have jumped platforms successfully. Is that content play on your competitive radar?TD: In the early months or years, it's not going to result in any sort of meaningful subscriber loss, much in the same way in the early years of cell phones, it didn't result in the loss of meaningful land lines. But what it does do is change consumer behavior.Jim Cooper is managing editor of Mediaweek.

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Terry Denson Wants Your House

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