Digital Delivery - Broadcasting & Cable

Digital Delivery

With analog exiting, stations launch wave of channels
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On weekday mornings in Salt Lake City, music station KZHT(FM)'s raucous drive-time show, The Morning Zoo, is simulcast on The Hive, a new digital broadcast TV station operated by Clear Channel Television's ABC affiliate, KTVX. On a recent Monday, the three hosts reenacted scenes from The Sopranos—billed as The Zoopranos—in high-pitched voices that the DJs called “The Sopranos on helium.”

“No disrespect, Tony, but you've been in a coma,” said one DJ, portraying a Sopranos mobster in a soprano voice.

Funny? Maybe not, but The Morning Zoo and the TV station it lives on are critically serious to the future of Clear Channel, the nation's 17th-largest station group. The Hive is one of the latest attempts by a station to make use of the massive digital spectrum that will be made available to the nation's broadcasters when they give their current analog spectrum back to the U.S. government (currently slated for 2009).

Clear Channel, like many broadcasters, hopes that a hyper-local news and entertainment channel will be an ideal digital broadcast complement to its current affiliate. The Hive, named for Utah's Beehive State moniker, launched quietly a year ago and, in late March, picked up digital cable carriage on Comcast Cable, the market's biggest operator. The Morning Zoo is followed by blocks of locally themed programming, including high school sports, reruns of KTVX news, and viewer-contributed content, such as concerts and short documentaries.

News, weather fill digital void

With their traditional business under siege, local broadcasters regard these new digital channels as a way to grow, independent of networks and syndicators. Competition for audiences has never been so fierce. Viewers are increasingly turning to the Internet, video-on-demand (VOD) and wireless technology for entertainment. At the same time, network programming—long one of a station's biggest selling points and a huge promotional platform—is now a commodity, as the broadcast networks funnel hit shows and sports to the Internet and iTunes.

“Like the networks, we have to try new things with our programming,” says Clear Channel Television President Don Perry. “We need to capitalize on our local relationships.”

To date, stations have been multicasting local weather and news channels on their digital broadcast space with a vengeance. The most widely distributed channel is NBC's Weather Plus, with local versions in 90 markets covering 75% of the country. To compete, rival ABC and CBS stations in dozens of markets have built their own local news and weather channels.

Broadcasting multiple digital channels is possible now that 80% of approximately 2,000 U.S. TV stations have upgraded to digital technology. The increased digital spectrum offers local broadcasters the best opportunity to launch new businesses. Along with much-hyped high-definition broadcasting, stations can broadcast multiple channels, transmit data or even support a new TV-delivery service, such as USDTV, a fledgling multichannel TV service available in a handful of cities and marketed as a low-cost alternative to cable and satellite.

Now stations are unveiling a variety of channels beyond news and weather forecasts. Several groups, including Clear Channel and NBC Universal, are developing local entertainment channels. The Tube, a music-video network, has deals with three major station groups, while Sinclair Broadcast Group and Equity Broadcasting are launching stations stocked with classic TV shows. Publisher Primedia and Multicast Networks Groups, a multicast content provider and distributor, last week unveiled Motor Trend TV, a 24/7 digital channel featuring auto-themed programs. It launches in early 2007. Even broadcast networks are digital fodder. When The CW and My Network TV debut this fall, the services will air on digital affiliates in many small and midsize markets.

“A lot of time and a lot of angst have been spent on the technical issues of digital broadcasting,” says Dick Haynes, senior VP of research for TV consulting firm Frank N. Magid Associates. “Now stations are asking, 'What are we going to do with it?'”

In a new study made available exclusively to B&C, Magid evaluates several emerging formats—including information/entertainment hybrids like The Hive—to help stations maximize their digital spectrum. Among the promising ideas, Magid says, are family programming, music videos and local entertainment.

While the majority of stations have upgraded to digital, however, less than half of them are broadcasting new services, instead sticking to a simulcast of their analog station and an HD feed. Haynes' advice to local stations: “Look at the local things in your market that are not being served very well.”

“News and weather are things our clients already deliver in spades,” says Magid VP of Corporate Development Bill Hague. “Beyond that, rather than just throwing something up, we're trying to figure out what works with consumers.”

In its research, Magid tested consumer interest in dozens of programming ideas for digital channels. Local weather and news—TV stations' best-known products—were the most popular. After that, several ideas popped: family-friendly programming, morning traffic, music videos, local entertainment and events, and employment information.

The appeal of some ideas varies by market and demographic. In Texas, for example, where high school football is all the rage, Magid might advise a station to create an entire channel devoted to games and coaching shows. In traffic-jammed cities, such as Atlanta or Los Angeles, a morning wheel of local traffic cameras might be extremely popular. In a city such as New York or San Francisco, both experiencing major influxes of new young residents, an employment channel could work well.

As station owners search for ideas, though, some executives say they are hamstrung by government regulations. Under current rules, cable and satellite operators are required to carry only one digital broadcast feed from stations, typically a simulcast of the main analog station. Without a new “must-carry” law forcing cable and satellite companies to carry these digital channels, stations must negotiate for carriage like any other cable network or use their retransmission consent as leverage.

In a recent NAB survey, 85% of stations said they would create new local programming for a secondary channel. However, according to the same poll, only half of stations are currently broadcasting multiple services. The main reason: 80% said they were “extremely unlikely” to launch new channels without a must-carry provision.

While digital stations are available over-the-air, only about 15 million TV sets have the digital tuners necessary to pick up the signal. If such a channel gets cable carriage on a digital tier, penetration could jump to about one-third of a market, depending on cable's overall local penetration. After 2009, the government will likely subsidize the cost of tuners for the remaining households that are without them and are not hooked up to cable or satellite.

Operators shouldn't be allowed to pick and choose which digital channels they want, says Gannett Broadcasting President Roger Ogden, in large part because the new digital channels take up the same—or less—space than the old analog channels. “It shouldn't be the operators' call,” Ogden says. “They shouldn't be the gatekeepers.”

National Association of Broadcasters President David Rehr also says cable operators shouldn't be able to strip out digital channels they don't want. Without multicasting, he says, “the American people will have less choice in local programming.”

Magid says new digital stations could be programmed like traditional affiliates, with a variety of shows, rather than being specifically themed like niche cable networks are. By “narrowcasting,” the firm says, stations can aggregate a larger audience and appeal to more advertisers. A channel could air local news and kids programming in the morning, while afternoons could be devoted to local entertainment or sports.

In New York, for example, WNBC's new channel, dubbed 4.4 for its digital location, offers an evolving mix of local news, information and entertainment. The programs run on a wheel and repeat often, so viewers can catch them at several points during the day. Its current lineup features locally produced shows, such as travelogue Jane's New York and movie-review program Reel Talk, repeats of local news, and extended coverage of area events, such as the Tribeca Film Festival. In September, WNBC plans to add content submitted by viewers, such as documentaries, and possibly sports. “We looked at what a station could do in the market if only we had more time,” says WNBC General Manager Frank Comerford. The channel's programs are archived on WNBC's Web site.

To reach even more viewers, Magid is encouraging clients to explore on-demand relationships with local cable operators. The very content that runs on a digital station or the main channel could be supplied to cable companies' VOD tier. A few dozen stations, including several that are CBS-owned-and-operated, offer local news and specials for free on local cable companies' VOD services.

Since most secondary digital channels are less than two years old, the revenue is small, but it is growing. From 2004 to '09, local broadcasters' revenue is expected to grow 3.4% annually, according to BIA Financial Networks. Revenue from new digital channels could raise that by a few percentage points a year, the research firm says. For a mid-market station with $20 million in revenue, that would translate to an additional $600,000 per year. Sinclair says its new classic-TV station, launching next month on WBFF Baltimore, will generate $500,000 in just six months on the air this year.

Owners say most services are profitable soon after launch, thanks to low start-up costs and programming that is created in-house or obtained by bartering for advertising time.

The Tube and Motor Trend TV, for example, are free in exchange for advertising time. Affiliates also receive time for local commercials, such as one minute per hour on The Tube, and have the option to insert locally produced programming. Equity Broadcasting's Retro Television Network is also free in return for overnight hours of infomercials and paid programming. A more costly model will be producing original content for digital or buying syndicated series and movies.

Marching in place

To generate advertiser appeal, digital stations are often positioned as in-depth advertising vehicles. A client could sponsor shows or even entire channels. In Memphis, Tenn., Beal Street, the main drag of music clubs, is the sole advertiser on Raycom-owned NBC affiliate WMC's version of The Tube. (Along with Raycom, Sinclair and Tribune Broadcasting stations plan to launch The Tube this summer.) Beyond traditional spots, WMC General Manager Howard Meagle says the station is developing co-branded programming, such as concert specials.

Similarly, Motor Trend TV will offer advertisers opportunities to sponsor shows or air longer commercials. “We can be flexible with the length and types of advertising,” says Jacqueline Blum, president of Primedia Enterprises. “We don't want it to be a 24-hour commercial, but we'll be creative in how we integrate advertisers.”

Says Sue Johenning, executive VP/director of local broadcast for Initiative Media, “Stations have an opportunity here to create specialized content and provide platforms for consumers and advertisers to interact.”

Stations are also marketing digital channels to new clients, particularly small local businesses. Because of the limited distribution, ad rates on digital stations are lower than a main station, allowing first-time advertisers an affordable entrée into TV.

For now, however, most digital stations are largely a concept sell. The majority are not currently receiving Nielsen ratings. If a digital station is simulcasting the main channel, Nielsen bundles its viewership into the analog station's ratings. For a stand-alone service to obtain full program ratings, it must register 9.5% of households in a market. Then, the station would have to buy a separate Nielsen subscription. While the businesses are young, proponents say they will get ahead by jumping in early.

“We have been marching in place, waiting for this to become a business,” says Paul McTear, CEO of Raycom Media. His company's stations were the first to sign with The Tube last summer. “The response in our markets has been very positive. This is a real business now.”

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