Head of the recently revamped and renamed network wants to use his 54 stations and network to offer multiple ad-supported channels based on the model of his just-announced kids deal with Scholastic, Classic Media and NBC Universal
Earlier this month, Ion Media (formerly Paxson Communications) announced it was joining forces with NBC Universal and three producers of children’s programming—Scholastic, Classic Media and Corus Entertainment—to launch a new educational children’s network on one of Ion’s national digital broadcast channels.
The venture would also supply FCC-mandated blocks of educational programming to Ion’s analog channel and to NBCU’s two broadcast networks—NBC and Telemundo.
The venture was the first operational initiative for Ion since former NBC executive Brandon Burgess took the reins of the financially troubled TV station group and network last fall.
Ion has tremendous broadcasting assets. Its 54 digital-ready TV stations reach some 69 million of the nation’s 110 million TV homes. And cable and satellite deals push the reach to 91 million homes. It’s a network that needs no affiliates—it’s all O&Os.
Ion/Paxson founder Bud Paxson assembled the group/network, but spent too much on programming, ran up too much debt and attracted too few viewers.
As the new CEO, Burgess spent his first several months on the job putting the publicly traded company on a firmer financial footing and reassuring investors.
In this interview with TVNewsCheck, Burgess looks past the financial challenges and discusses the children’s venture as well as the opportunities inherent in his unique digital distribution platform and in broadcasting in general.
Why children? There seems to be a lot of players in that space in cable.
We think it works for us as a business proposition because of who we are doing it with. We are not doing it on our own. We are doing it with four of the preeminent players in the kids space, and I always thought it was an interesting space if you took a different angle—less the commercial route and more the route of literacy and values. And we have gotten strong response to our announcement.
If these four kids players think it’s a good idea and that it works for them, then it certainly should work for us. That’s where I draw additional comfort from. And finally, nobody has the distribution that we have. We have three analog networks that are going to provide instant exposure of this to 200 million homes if you count us, NBC and Telemundo and that’s before you even consider the digital distribution.
Our theory is that if you put the right distribution and right content together and you do it with the right partners, we are going to take a share in the category.
And this is all going to be advertiser-supported.
Except for the VOD piece where we hope to get a penny or two over time. VOD is part of the business plan.
How much money are you putting into it?
We are not disclosing numbers, but, suffice it to say, that given that all the infrastructure is already built and that a good amount of the content is library content, it’s a relatively efficient way to start up a business.
Are Telemundo and NBC going to pay a fee to the venture for the children’s blocks that they will air?
We are not getting into the financial terms of the arrangement.
You recently said that music and urban were other possible formats for digital channels. Can you elaborate on that?
The kids network is a first step. It’s one idea that hopefully is part of a bigger puzzle. We have capacity, if we really stretch it, to do four or five of these types of projects. I’m not sure we are going to do all four or five in the immediate term, but we may do one or two others that we are thinking about. We may take a similar type of approach, although all of them may not be as elaborate from a coalition-building standpoint. That takes a lot of time, and we may want to move quicker on some of these.
Is that four or five digital channels in additional to the main analog channel?
Certainly four in addition to the main channel.
So what is the plan for the main channel?
The analog is a bit trickier than launching a new channel. When you launch a new channel, you have a clean sheet of paper. In analog, we are going to have to be a little more gradual and take our time and make sure that we transition in a way that does not affect our revenue model, which we depend on.
I don’t think you are going to see a dramatic shift on analog. More likely what you’ll see is taking parts of the schedule and trying new ideas on them. Some of those may be coupled to launching those additional digital networks. You can use the analog platform as a promotional base for launching the 24/7 digital services.
So, for the time being, it will continue to be heavily infomercials?
Yes, and in primetime, we are comfortable with the family-type positioning until we have a better idea or a different idea. Getting a point-five [rating] these days, which we do, is not something to be underestimated.
But isn’t your problem that you don’t get affiliate fees in addition to ad revenue. How are you going to compete with cable if you only have the one revenue stream?
The same way every other broadcaster competes with cable.
But other broadcasters are local programmers. You aren’t. Your service looks a lot like cable, except you have half the revenue streams.
There are a lot of services out there that make a living off of advertising alone. We have what we have here. I can’t change what we have. We feel pretty good about the assets we have. The industry may not be as easy as it was 30 years ago, but there is still $60 billion in advertising out there. Our challenge is coming up with an idea so that we can get a small slice of that. And remember, the majority of our income is not at all related to spot advertising. It’s all long form. Only a tiny proportion of our profitability is related to primetime so if we can’t do better than that, shame on us.
No more original programming, I take it.
Bud [Lowell Paxson] discontinued that last year and probably rightfully so because that was a financially impossible arrangement. The revenue generation did not justify the production costs. So for the time being we are going to rely on library programming, some of our own and some from the outside.
You lease spectrum to USDTV, which is using broadcast digital spectrum to offer a package of cable services to subscribers equipped with a set-top box. Do you see yourself getting more deeply involved in the venture?
No, not on a financial basis. But we support anybody who puts out boxes that are terrestrially enabled. If there were another three boxes that came out that used terrestrial spectrum to feed their hard drives I would support them too.
Could you elaborate on that?
I think broadcasters are missing an opportunity to market terrestrially to consumers. Cable and satellite are dominating the consumer platform. If we could do something along the lines of what they are doing in the United Kingdom where terrestrial digital has had a phenomenal adoption in the last three years, that would give broadcasting a whole new wave of relevancy in this country.
Consumers would like it just as they like it in the UK. They get 30 channels for free. That’s where we are going to try to push the discussion. We obviously can’t do it ourselves. But the types of things we are doing will hopefully be additive to people who want to join forces and put together their own version of a free over-the-air digital package and market that to consumers as their main television solution for the home.
Broadcasters need to work together—ourselves, public stations, the small broadcaster, big broadcasters, anybody who has a multicast offering can easily make themselves part of a marketing coalition that says to consumers: “If you buy the following terrestrial receiver box, you can get all of our collective channels free in your home and you don’t have to pay $60 for cable.” I know everyone thinks that is remote, but they thought it was remote in the UK five years ago.
If you are going to squeeze as many channels out of your digital spectrum as you say, I presume that HDTV is not part of your plan.
No, I do not think HDTV is a killer application. I may be in the minority on that. I certainly don’t see it for us. Maybe for ESPN and other networks with sports. But for us, right now, that’s not what we are looking to do. And if we did, we would do 720 so that we would still have capacity to transmit two or three digital channels.
How critical is it to your business for the government to mandate that cable operators carry all your digital signals—multicast must carry?
It’s not critical. It’s helpful. I’ve been following all this talk about indecency and a la carte marketing of cable. I think must carry will single-handedly be a solution to all those things. If broadcasters get must carry, you are going to see a whole wave of decent family-oriented content show up at no cost to consumers that will also keep cable honest from a pricing standpoint.
From a policy standpoint, multicast must carry is the right thing to happen. I would hope that rational minds will prevail and they will figure out that must carry is a lot easier to get through the system than a la carte.