MULTICASTING 2016: PART 1

Diginets Keep Growing, Despite Auction Cloud

While the spectrum auction and repack could raise challenges, most multicast network players say they’re bullish on the business, especially with the likely adoption of ATSC 3.0. Diginets keep adding affiliates and expanding coverage and the top ones have begun attracting general market advertising. This is Part 1 of a four-part special report on multicasting. Parts 2 and 3 also appear today. Part 4, running Thursday morning, will focus on the technology of compression and channel sharing. You can read the other stories here.

Encouraged by the success of its first multicast network, Antenna TV, Tribune Broadcasting is cooking up another, Antenna TV Classics.

It would specialize in “the older-skewing shows,” says Sean Compton, president of strategic programming and acquisition for the station group. The original Antenna TV would then be free to recalibrate its lineup with shows to attract younger viewers, he says.

If Tribune goes ahead with the new channel, it will reaffirm the fundamentals of the multicasting business, which converts low-cost, but well-known movies and TV shows, into modest, but steady, revenue streams and profits for the diginets and their affiliates.

Although no new channels have appeared this year, at least five debuted last year: Laff, a comedy network; Justice Network; a privately owned true crime and forensic science network; Decades, a co-venture of Weigel and the CBS Television Stations; Buzzr, a FremantleMedia-backed channel comprising the company’s vast library of old game shows; and Comet, a sci-fi channel developed by MGM in association with the Sinclair Broadcast Group (see story here).

The basic health of the business is also reflected in TVNewsCheck’s annual Top 25 ranking of diginet by broadcast coverage (see chart below). Compared to the ranking published in May 2015, most of the networks have increased their coverage of U.S. TV homes. On last year’s list coverage ranged from 94% for No. 1 MeTV to 20% for No. 25 Retro TV. This year, MeTV is again in first, but with 96%, while No. 25, The Works has 37%.

The top spots on the chart feature the same players as last year, some have moved up a slot or two, others slipped back. Some networks are not on the list this year, mostly because others increased their coverage and displaced them as they moved up.

BRAND CONNECTIONS

As a quick look at the chart will also attest, the multicast network business is dominated by a handful of key players, including Weigel Broadcasting (owner of MeTV, Movies!, Heroes & Icons and Decades); Katz Broadcasting (owner of Grit, Escape and Laff) and co-managed Bounce Media, owner of Bounce TV; private-equity owned Ion Media, with Ion Life and Qubo; and Tribune, which, in addition to Antenna TV, owns This TV, a movie channel in partnership with MGM.

TVNewsCheck‘s Top 25 Digital Broadcast Networks

Ranked By TV Households Coverage

 
Network Launched Programming Top Executive Owner

Coverage

1. MeTV 2010 Classic TV Neal Sabin Weigel Broadcasting 96%
2. Grit 2014 Men Jonathan Katz Katz Broadcasting 93%
3. Antenna TV 2011 Classic TV Sean Compton Tribune Media 87%
4. Laff 2015 Comedy Jonathan Katz Katz Broadcasting 85%
4. Escape 2014 Women Jonathan Katz Bounce Media 85%
6. This TV 2008 Classic Movies Sean Compton Tribune Media/MGM 83%
7. Bounce TV  2011  African American  Jonathan Katz Bounce Media 81%
8. Create* 2006 How-To Cynthia Fenneman American Public Television 79% 
9. getTV 2014  Classic TV, Movies Jeff Meier, Tom Troy Sony Pictures TV 78%
10. Comet 2015 Sci-Fi John Bryan MGM/Sinclair 72%
11. World* 2007 Documentaries, News Jonathan C. Abbot WGBH Educational Foundation 66%
12. Buzzr TV 2015 Game Shows Ron Garfield, Thom Beers FremantleMedia North America 65%
13. Ion Life* 2007 Lifestyle/Health  Brandon Burgess Ion Media 63%
13. Qubo* 2007 Kids Brandon Burgess Ion Media 63%
15. Cozi TV* 2012 Classic TV, Lifestyle Valari Staab NBCU Owned TV Stations 62%
16. Movies! 2013 Classic Movies Jack Abernethy Fox TV Stations/Weigel  61%
16. UniMas 2013 Hispanic/Spanish   Albert Ciurana Univision 61%
18. Heroes & Icons 2014  Classic TV Dramas Neal Sabin Weigel Broadcasting 60%
19. Retro TV* 2005 Classic TV David Leach Luken Communications 58%
20. Decades 2015 General Entertainment Neal Sabin Weigel Broadcasting 55% 
21. Justice Network* 2015 Crime/Investigation Steve Schiffman Lonnie Cooper 54%
22. SonLife* 2010 Religious Jimmy Swaggart Jimmy Swaggart Ministries 50%
23. Rev’n* 2014 Automotive David Leach Luken Communications 45%
24. Azteca America* 2001 Hispanic/Spanish Manuel Abud Azteca 41%
25. The Works 2014  Classic TV/News, Comedy  John Bryan MGM 37%

Source: Networks supplied coverage percentages, except for those with asterisks (*). Those percentages came from Across Platforms consultancy.

 

 

The diginets say growth is still steady where it counts most – in audiences, ad revenue and distribution. And they’re confident that that growth will continue.

So they’re hard at work promoting their existing channels. Some are investing in new programming acquisitions. Others are dipping their toes into original production.

Diginet broadcasters attribute the fact that no new networks have launched since Comet last October primarily to the uncertainly caused by the FCC’s on-going incentive auction, in which the agency is brokering the sale of TV spectrum to wireless carriers. The result is likely to be the elimination of hundreds of TV stations, which now serve as affiliates for the diginets.  

Fewer stations will mean fewer channels to support new networks. Even some well-established networks may be squeezed out in what could become a life-or-death game of musical chairs.

That game may have already begun with most of the major diginet owners adding affiliates and coverage in the past year.

Just last month, in this year’s biggest affiliation announcement, Katz’s Grit, Escape and Laff — along with separately owned but co-managed Bounce — announced new affiliation agreements encompassing 81 stations in 54 markets. The majority of the affiliations were with Nexstar stations.

“It may have been the largest distribution deal in the history of this space,” says Katz CEO Jonathan Katz. “All of our networks are on a growth trajectory that is positive.”

Tribune’s Antenna TV made a splash last January when it added Johnny Carson’s Tonight Show (now titled just Johnny Carson) to its latenight lineup — a surprisingly complex deal (including the painstaking process of clearing rights for music and other elements).

The publicity surrounding the Carson acquisition helped raise Antenna’s profile, Compton says. “I thought it would be huge and we knew it would get us to the promised land in terms of exposure, promotionally.”

First announced in August 2015, Antenna’s Carson deal paved the way for the addition of 26 new affiliates last fall in advance of the Carson premiere. Antenna is now available in 128 markets representing 86% of TV households, according to Tribune.

Of all the diginet companies, Katz is farthest along in the development and production of original content.

Bounce has three original scripted series, plus a news magazine show (with long-time journalist and news anchor Ed Gordon, formerly of BET). And production is under way on the first original series for Escape, Katz says.

“Investing in originals raises the delivery bar and your ability to appeal to advertisers in a new and different way, which again allows you to reinvest,” Katz says.

Weigel is producing an original series too — a daily one-hour documentary-style show on Decades called Through the Decades, narrated (and sometimes hosted) by Bill Kurtis.

Each show is keyed to the day’s date, and reports on what happened on that date in different decades. Neal Sabin, vice chairman of Chicago-based Weigel, calls the daily production of this show “ambitious,” requiring a staff of 20.

The majority of affiliation agreements in the diginet business are based on a barter splits, although some networks pay for carriage and keep all or most of the inventory. And, for the most part, direct-response still comprises the vast majority of commercials on the diginets.

“This TV and Comet are still totally reliant on DR and we’re very happy in that business,” says John Bryan, president, Domestic Television Distribution for MGM Studios.

“It’s the purest form of knowing your audience because at the end of the day, if the phones don’t ring for these guys, they don’t come back and buy your time.

“So the fact that we have had consistent advertisers in both of these channels over and over again means people are watching our channels and calling and buying their products.”

Antenna TV also boasts that it is getting general market advertising — local and national — to supplement the DR. “I don’t understand a lot of these stations when they say they can’t sell it,” says Tribune’s Compton. “When I look at most of our stations [they’re selling it like] gangbusters,” he says.

“We have markets doing a couple of million bucks locally,” said Compton, who noted that the Chicago-area Chevy dealers came on board as a client on Antenna after the Carson show was added to the lineup.

At the same time, however, every diginet operator seeks to increase the audiences to a point where they can sell to general market advertisers, particularly national ones.

Among the few that have is Bounce. “I would say we have 160 general market advertisers on [Bounce],” Katz says. “There’s not an agency on Madison Avenue that doesn’t buy Bounce TV.”

Katz also reports that Grit and Escape, which both launched in 2014, are now C3-rated (along with Bounce, which was launched in 2011). He expects Laff to be C3-rated soon.

The shadow on the business is the auction and the reorganization or repacking of the TV band that will follow it to segregate the remaining TV spectrum from the spectrum that has been reallocated to wireless.

“The elephant in the room is what is the auction going to mean and repacking it all,” Sabin says. “Anyone who tells you they know exactly what’s going to happen doesn’t know what they’re talking about because we don’t know.”

Contributing to the uncertainty is the “quiet period” in which the FCC has asked broadcasters to refrain from discussing, or otherwise revealing, their auction plans. As a result, no one knows who’s planning to participate.

“People aren’t talking about it,” Sabin says. “The process of repacking isn’t where you lose [affiliates],” he explained. “The [problem] is the stations that go out of business and don’t get repacked.”

Sabin and others say they have tried to hedge their bets against possible auction and repack fallout by forging long-term affiliation agreements with stations and station groups that they feel are intent on remaining in the broadcasting business.

“We have long-term affiliation agreements and I feel pretty good about the partnerships we have with real broadcasters that want to stay in this business,” Sabin says.

Jonathan Katz was even more bullish on the future for multicast networks. “Nobody has a crystal ball [on] how the auction will end and how its effects will shake out,” Katz acknowledged. “That said, we are very confident of our company continuing to thrive post-auction.

“We actually see nothing but upside,” he says. “We have made it a point to partner with very strong stations [and] very strong station groups who are in the broadcasting business.

“From the strength of our partnerships, we have pretty good visibility as to where any risk around the edges might be from the auction. We don’t believe that we are significantly exposed.”

If the industry’s key players can get through the FCC auction and repack with minimal adverse impact on their businesses, then the future is bright, they insist.

All of them say they’re looking forward to the industry’s adoption of the new ATSC 3.0 digital broadcast standard, which is now under consideration by the FCC. This, the diginet owners say, will create more bandwidth for ancillary channels — and opportunities for them.

“It’s a strange time right now,” says MGM’s Bryan. “But ATSC 3.0 is actually going to open up more bandwidth. There may be a two-year period here where it gets a little bumpy, but I think the other side of this is nothing but growth and a big-time future.

“And that’s why I think you’re seeing the Sinclairs and Tribunes of the world wanting to own these channels.”

This is Part 1 of a four-part special report on multicasting. Parts 2 and 3 also appear today. Part 4, running Thursday morning, will focus on the technology of compression and channel sharing. You can read the other stories here.


Comments (4)

Leave a Reply

Tom Hardin says:

July 27, 2016 at 11:41 am

The “good” thing is that the “cable” systems are carrying the Diginets. The “bad” thing is that they are not grouping them with the locals who see this as additional revenue streams. Association is a big thing. Of course, many people are dropping pay TV and opting for OTA and a streaming service. Both my children are in that category. They like the MeTV, Grit, Comet, ION, etc. My son wants to watch Diginets on his phone when he is communting, waiting on the VA, etc.

Ellen Samrock says:

July 27, 2016 at 12:23 pm

Something tells me the FCC will be revising its clearing target multiple times in this auction. 600 MHz is considered low value spectrum and the big three bidders have only committed a total of 22 billion to buy it. So we may be losing fewer channels and fewer stations then previously thought. Plus, with 3.0, stations can be packed closer together so there may be space for nearly everyone when this auction fiasco is finally over. Of course, this would be great news for diginet owners and for those who enjoy them by means of free OTA broadcasting. As for DR, no doubt everyone in the business has their take on it. But for our station it has been a consistent money-maker and compliments our local advertising nicely.

Cheryl Daly says:

July 27, 2016 at 6:49 pm

Regarding music clearances for the Johnny Carson shows, the majority of the programs that Antenna TV has aired do not have musical acts. The flutist James Galway played a classical piece that presumably is in public domain. On another show, actress Diahann Carroll sang an obscure song written by Barry Manilow. There also may have been a classical pianist playing a public domain piece on yet another program. That’s about it for music performances on the 208 Carson shows that have aired since January 1st. One program announced the appearance of the 1980s group Katrina and The Waves, but due to time they never performed and the lead singer came onstage only to wave good bye at the end of the program. During a few of the Carson shows on Antenna TV, Carson mentions that the Tonight Show band is absent due to a musicians’ strike. So Tribune apparently has avoided licensing the shows with major music artists. Regarding the advertisers, it’s a parade of death during the breaks with repetitive commercials for funeral insurance and burial plots, along with lawyers promising a big pay day for viewers who used talcum powder or who developed male breasts due to a prescription drug. Time-shifting the program with a DVR thankfully allows skipping through these ads. Antenna TV is one of the few enlightened diginets that sends out its national feed without an annoying logo during programming, but since last fall the local affiliate has inserted a distracting network ID in the lower right corner that spoils the viewing experience.


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