Good Times for Digi-Nets...But We've Seen This Movie Before

For booming subchannels, mass consolidation of  broadcast TV threatens to separate multicasting haves from have-nots | @BCMikeMalone

On one hand, it’s a fantastic time to be in the digi-net space. Viewers
are finding the myriad subchannels, and station general managers speak of real revenue finally coming
from multicast tiers that formerly
aired repurposed newscasts
and loops of Doppler radar. On
the other hand, the torrid consolidation
going on among station
groups these days, such as
last week’s announcement that
Sinclair plans to acquire Allbritton
for a little shy of $1 billion,
makes it more challenging for the new players
in the digi-net game to find affiliate partners
from the shrinking batch of broadcast groups.

Why This Matters
Multicast networks are facing some of the same challenges as the early cable nets: gaining carriage, standing out with their programming and overcoming competition from the big players.

The rookie players entering the arena need
deep pockets, deeper programming libraries
and a deeper-still reserve of luck. “If you’re
a small network, you have to be concerned
when there are fewer players and fewer people
to sell your program to,” says Michael
Kokernak, president of digital media consultancy
Across Platforms. “As a small network,
how do you get face time with the CEO of
Tribune when he’s focusing all
his attention on [in-house diginets]
This TV and Antenna TV?”

Similar to Gannett’s planned
acquisition of Belo, Tribune’s
blockbuster $2.7 billion pact to
acquire Local TV LLC—both
deals await regulatory approval—
gives what will be a 42-station
group substantial leverage
when it comes to purchasing programming for
the subchannels. For Tribune, it means vintage
series such as Father Knows Best and The Partridge
on Antenna TV, which reaches
66% of U.S. homes, and classic series and movies
on This TV, reaching a notable 85.5%.

That’s a critical advantage as the demand for
entertainment fare gets more intense with each
new digi-net’s arrival. “We all compete for
product, and there’s only so much catalog out
there,” says Sean Compton, Tribune Broadcasting
president of programming and distribution.
“This gives us more buying flexibility, and
increases the power of Antenna TV and This TV
to buy more programming.”

Get More Movies!

Wide Net.jpgIndustry insiders offer a wide range of estimates
as to how much revenue the digi-nets
collectively bring in per year, ranging from
$150 million to $200 million, though all
seem to agree the number is growing rapidly.
A Me-TV rate card in Kansas City shows a
30-second spot during primetime for $15,
while one in Salt Lake City goes for $60. A
Bounce TV rate card in Jacksonville lists a
30-second prime spot at $20.

While the history of multicast television is
relatively brief, there has never been such a
flurry of activity in its lifetime. One of the best
established subchannels, entertainment network
This TV, breaks from a founding partner
November 1; Tribune takes over programming
duties from Weigel Broadcasting, and pairs
with cofounder MGM, which handles distribution.
John Bryan, president of domestic television
distribution for MGM Television, called
Tribune “the best organization to optimize the
network’s growth through new content development
and distribution opportunities.”

Weigel, meanwhile, split from This TV to
focus on its growing Me-TV channel—as well
as distributing the recently launched Movies!
channel with Fox Television Stations (FTS).
Movies! launched in May on 17 Fox-owned stations
and has added a handful of non-Fox partners
too, including Weigel’s own in Milwaukee
and South Bend, Ind., and Landmark Media’s
KLAS Las Vegas—good for 37.7% of the U.S.
Frank Cicha, senior VP of programming at FTS,
says the subchannel stands out by offering a
high-end classic film experience: 16 X 9 screen
resolution, limited commercials, films edited for
decency, not for running time. “It’s not what a
lot of people are doing right now,” Cicha says.
“I think it’s finding an audience.”

Film buffs seem to appreciate the free
flicks, which are primarily pre-’90s releases. “You’re a filmmaker’s dream come true,”
came one Detroit viewer email to Fox. “Not
only do you show classic and hard to find
films, you show them in their correct aspect
ratio. Big thumbs up!”

Neal Sabin, executive VP at Weigel Broadcasting,
says a new movie-focused digi-net
better offer something special. “People can
watch movies a hundred different places,”
he says. “For a commercial, ad-supported
service, you have to give viewers the best experience

That includes nothing on the screen—no
snipes or logos—but the feature film, he adds.

A second compelling entrant in the entertainment
digi-net space is getTV, which Sony
Pictures Television launches this fall. The channel
too will focus on classic films—those primarily
from the ’30s through ’60s, says Superna
Kalle, senior VP of U.S. networks at Sony Pictures
Television and general manager at getTV,
which will debut on 24 Univision subchannels.
Kalle says the net will reach 44% of U.S.
households at launch. “We definitely saw an
opening in the space,” she says. “TCM is the
only other one doing these kinds of movies.”

The newbies join the likes of classic TV
channel Me-TV, ABC’s Live Well Network,
NBC’s Cozi TV—which launched in January,
Spanish language players such as MundoFox
and Estrella TV, and the African-American
targeted Bounce TV, among many others, on
the multicast tier, making it feel a bit like the
early days of cable television all over again.

“People figured out there’s a business there,”
says Sabin. “They said, hey, if little Weigel can
do it, why can’t we?”

Spreading the News

Amidst the myriad network programming
options available for their dot-twos and dotthrees,
other stations are opting for local news
on their multicast tiers—whether it’s a 24/7
news and weather channel, or a unique newscast
pre-empting a net’s scheduled programming.
Local TV’s WNEP Scranton has 10 p.m.
news on its Antenna TV channel. Hearst TV’s
WXII Winston-Salem is averaging close to a 1
household rating with its year-old 10 p.m. news
on Me-TV. The decision to air news came from
the fact that a substantial number of viewers
had found Me-TV, says Hank Price, president
and general manager, and that WXII’s news
crew is a powerhouse. “There was only one 10
p.m. news in the market, and I felt like there was a bigger appetite than that,” he says. “Me-
TV has been a huge success, and we saw this as
a new opportunity.”

Super Subs.jpgThe new entrants to the dot-two space are
working hard to stand out. For starters, they
need high quality programming, decent channel
placement with the multichannel video
programming distributors and a clear point of
differentiation amidst the thicket of competition.
For some, original programming mixed
in with the classic series and films is a way
to bust out of the clutter. Bounce TV, which
inked its first renewals with the likes of Raycom,
LIN and Belo, among others, plans 100
hours of original programming in 2014, including
the sitcom My Crazy Roommate and
the pop culture roundup series BRKDWN.
Cozi TV’s originals, which complement vintage
shows from the NBCUniversal and Sony
libraries, such as Magnum, P.I., include the
reality show Next Great Family Band.

Just as brand-defining original shows elevated
the profiles of cable channels AMC (Mad
, Breaking Bad) and IFC (Portlandia,
Maron), Kokernak says quality original programming
will help the digi-nets earn their
place on the programming guide. “The cable
networks took off when they had an original
hit,” he says. “It can’t all be reruns forever.”

Despite the challenges, the newer digi-nets
don’t seem terribly fazed by the shrinking
number of groups available to sell their networks
to. Kalle of getTV acknowledges that it’s
“hard to get anyone’s attention” on the station
group side amidst the frenzied M&A activity,
but says a digi-net is well on its way when it
lands one of the new supergroups as an affiliate
partner. “In one sense, it’s easier because
it’s one-stop shopping,” she says. “If you get a
large group done, you’ve got many markets.”

Since multicast network WeatherNation
already has a foot in the door at Gannett—
it’s on KUSA Denver and KARE Minneapolis,
among others—WeatherNation president
Michael Roberts sees consolidation differently
than if WeatherNation was on the
outside, pitching its multiplatform weather
content to the big dogs. “If anything, I think
it actually helps us,” he says. “It may open
some doors at Belo so we can come in and
enhance their weather products.”

Content Still the King

Several on the subchannel side say the networks
featuring distinct quality programming
will win out despite the contracting landscape
of buyers out there. The folks behind Bounce
TV like to say their network is tailored to viewers’
demands—as opposed to a repurposing
of a studio’s library. “The great networks live
on regardless of consolidation,” says Jonathan
Katz, COO of Bounce. “If you create a great
full-service network that resonates with viewers,
you’re going to have a long-term partner
in the market.”

For his part, Sabin has seen just about everything
on the multicast front since launching
This TV in 2008, and taking Me-TV national
two years later. Some digi-nets died
premature deaths, and some even failed to
launch, despite early buzz, snazzy marketing
campaigns and big-name backers. Me-TV,
meanwhile, is seen as an example of doing
multicasting right: Since moving beyond the
Weigel markets of Chicago and Milwaukee,
it reaches the most households among diginets,
gets national ratings, is a primary channel
in a number of markets—and is no longer
even considered a digi-net by Sabin and,
surely, some viewers.

He’s thankful he got in before the rush.
“If the product is good enough and stations
make money and viewers like what they see,
that can overcome a lot,” Sabin says. “But
if people think they can get in now—unless
you own a large group, or unless your business
model doesn’t involve 70% of the U.S.,
it’s gonna be tough.”