UNITY MOTION: AN HDTV PIONEER--WITH SOME FUZZY PLANS
Nov. 1 may be the dawn of the digital-TV era, but nationwide HDTV broadcasts have already begun. That's right. On Sept. 26, an upstart St. Louis company called Unity Motion Inc. began the country's first nationwide 24-hour-a-day HDTV broadcasts. Privately held Unity aims to exploit a "pre-mass-market" niche: the extreme, and extremely well-heeled, early adopters who will pay whatever it takes to get HDTV.
Although the service is up and running, real questions abound about its ability to pull together adequate programming. Unity's founder is vague, raising suspicions about how real this thing is. But give the company credit for daring to try.
Unity Motion was created by Lawrence Miller, who's now CEO and chairman. In 1991, he had just completed filming a 90-minute documentary on the history of the University of Illinois. While hanging out at the school library waiting for his girlfriend, he came across an article written by Francis Ford Coppola about HDTV. Then he checked out 30 Congressional Record reports where network employees expounded on HDTV. "It became clear it was the very best format out there," says Miller, "but there also were many sensible reasons why the networks couldn't do it."
'BIT OF A STRETCH.' Unity's gambit is to try to corral the top 5% of the market before economies of scale kick in to the benefit of big companies and programmers. It has worked with equipment suppliers to develop everything from production gear to uplink encoders to set-top boxes for consumers. "Everyone's background in the company is a bit of a stretch," says Miller. "But this has been an asset since we think more carefully."
Where is Unity getting its money? Miller explains: "At first, we financed ourselves. Then everyone we knew financed it. Two years ago, sizable money came in. But we're still private and plan to remain so." That "sizable money" comes from North Carolina's Marion Bass. "He jumped on us with tens of millions of dollars," says Miller, who adds only that capitalization is "deep into eight figures."
But all that cash doesn't solve Unity's big problem: Lack of programming. And that's why many observers doubt the company's prospects. Unity's current channel is mostly movies and sports. Miller says the company has contracted for 45 to 50 films, the most famous to have aired so far being Austin Powers. But this cult comedy has already been shown twice, and Unity has no more rights to broadcast it. Miller declines to offer any further specifics about the film library, saying only that Unity has budgeted $250 million for film aquisitions and that the most likely films are those late in their revenue stream, such as Caddy Shack or Animal House -- neither of which he has rights to. In many cases, Miller thinks he can acquire rights merely for the cost of conversion from film to digital video, which can vary from $25,000 to $1 million.
HUBBLE-CASTS? Miller says the first channel will feature "sports, special features that show off HDTV, and lots of music thanks to the great sound." Unity plans to add seven more channels by the end of May. But most of the programming will be outsourced, though Miller won't say with whom. Unity is also talking with game companies considering sponsoring HDTV versions of their games. Other wacky ideas: broadcasting shots sent from the Hubble Telescope.
Back on earth, Miller says he has a deal with The Palace in Auburn Hills Mich., where the Detroit Pistons play their National Basketball Assn. games and a popular concert venue. Unity has scheduled 156 live sporting events next year.
Who will watch those events? Miller foresees 10,000 Unity subscribers by yearend, rising to 100,000 by May or June '99, and perhaps as many as 200,000 by the end of '99. "The problem is equipment," he says. "We need supply to catch up with demand. And we need the support infrastructure to provide first-class service."
Indeed, only 50 receivers have been shipped so far, although Unity expects to deliver 500 more in December. Prices are steep: The suggested retail price of the 32-inch monitor is $6,995. The receiver runs $2,495. For now, there's no subscription costs. But fees of $48 a month will kick in in 1999.
Larry Chapman, executive vice-president at DirecTV, says Unity's business model doesn't add up. "It's premature to develop a business based on HDTV," he says. "We're just breaking even, and we have 4 million subs." Chapman notes that the costs for HDTV are far greater -- from cameras and other production gear to transponders, which cost $100,000 to $200,000 per month to lease.
Miller's endgame may make more business sense. After a few years, Unity sees itself becoming a broadcaster focused on another not-quite-mass-market niche: business and professional services, such as telemedicine and industrial security services. That leaves DirecTV's Chapman wondering whether Unity will be able to simply drop its existing base of movie viewers. Perhaps they'll enjoy watching open heart-surgery in HDTV instead.
By Steven V. Brull in Los Angeles
Updated Oct. 15, 1998 by bwwebmaster
Copyright 1998, Bloomberg L.P.