Special Report: Diginets, Part II

Diginets Growing With Old Shows + New Ideas

After years of experimentation, broadcasting specialty networks on subchannels is starting to draw viewers and revenue in amounts that really matter. Some peg the take at more than $200 million. While classic TV shows and movies are popular formats, others see the future in original programming.
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Flip through the channels on your TV and you’re likely to stumble across The Mary Tyler Moore Show on Me-TV, Six Million Dollar Man on Cozi TV and films like the 1955 black-and-white Not As a Stranger with Robert Mitchum on This TV.

This isn’t a trip back in time, but it is cause, perhaps, for the kind of optimism that broadcasting hasn’t seen since Mary arrived in Minneapolis and landed that job at WJM-TV.

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After years of experimentation and occasional flops, the business of broadcasting specialty networks on digital subchannels is starting to draw viewers and revenue in amounts that really matter.

Nearly two dozen diginets, several with U.S. household coverage of more than 60% (see chart at bottom of story), now vie with cable networks for advertising dollars, particularly the direct response (DR) variety. Some peg the annual spend at more than $200 million.

David Brenner is a partner at Marathon Ventures, a rep firm that sells ad time for a wide range of programs and networks, including NBCUniversal's Cozi and the independently owned African-American network Bounce TV.

“My best estimate for combined national and local ad sales in this business in 2009 was $10 million,” Brenner says. “By 2014, it should be doing between $250 million and $300 million.”

Brand Connections

A diginet executive thinks Brenner may be a little high. The top several networks are generating $30 million each from national DR advertisers, he says. “Maybe a little more; maybe a little less. Then, you factor in local on top of that and the total is probably between $200 million and $250 million.”

The most widely distributed diginets are Weigel’s Me-TV (84% of TV homes), MGM Television’s This TV (76%), ABC’s Live Well Network (66%), Bounce TV (61%) and Tribune’s Antenna TV (61%), according to a recent estimate by consulting firm Across Platforms.

Across Platform President Michael Kokernak says even though most diginets are carried on subchannels or LPTV stations, broadcasters are able to secure cable carriage for most of them as part of retransmission consent agreements.

Brenner says that buying several of the top diginets is like buying one of the most-watched cable networks like A&E or ESPN.

“On a 24-hour basis in 2014, the big networks — This TV, Antenna, Me-TV, Bounce, Cozi, getTV and Live Well — should be attracting a combined audience of between a 0.6 and a 0.8 household rating, and some days in primetime a 1 rating,” he says.

Today, multicasting runs on DR advertising, mostly national, because of the relatively small audiences.

“Direct response advertising is the purest form of advertising,” says John Bryan, president of domestic television distribution at MGM. “If an advertiser’s phone isn’t ringing, they don’t buy you again. We are very comfortable in the revenue generated from that business. The phone is ringing.”

For Fox TV’s upstart Movies!, DR is a perfect fit, says Frank Cicha, senior vice president of programming at Fox TV Stations, which in May launched the classic movie diginet in partnership with Weigel.

“We expect that will be enough to [offset startup costs]. Certainly, once we are rated by Nielsen, that will open the door for new advertisers. But, out of the gate, we are very confident DR advertising could support this.”

“The real opportunity is the local sales side,” says Sean Compton, president of programming at Tribune Broadcasting, which owns classic movie channel Antenna TV and, in October, will take over programming responsibilities from Weigel for MGM’s classic movie channel This TV.

“We give stations five minutes an hour. There are markets where stations take advantage of that; there are markets where stations don’t. Those stations will see from the ones taking advantage of this that there is money to be made.”

NBCUniversal’s Cozi, a classic TV channel with some original lifestyle programs like the restaurant makeover show Meal Estate debuting Aug. 3, also gives its affiliates plenty of inventory.

“On our affiliates, you also see general-market advertisers in local time periods,” says Meredith McGinn, senior vice president at Cozi. “And in our owned markets, we see a lot of traction with general-market advertisers.”

In time, if diginets continue to increase their distribution, other revenue sources like retransmission consent fees may be possible.

“Right now, there are no fees being generated on cable,” says Kokernak. “Eventually, that will happen. Stations may be able to get something like three or four cents [per subscriber] a month.”

Diginet executives and reps make no apology for the age of the programming on many of the networks. In fact, they say, it's a positive.

“What these networks have is programming that has been presold to viewers,” Brenner says. “In a very cluttered TV landscape, there is something reassuring and attractive about movies and TV shows that they have some familiarity with.”

Impressed with what other owners of vast TV and film libraries are doing, Sony Pictures is getting into multicasting later this year with getTV.

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Comments (5) -

PhillyPhlash Nickname posted a year ago
In this economy, these new additions -- such as the "Movies!" channel on some Fox affiliates -- represent a "cable killer." Stations should do advertising tie-ins with antenna sellers; many viewers still do not realize these channels are available free, over the air, with picture quality that exceeds the best that cable or even fiber can offer.
AZObserver Nickname posted a year ago
I think stations should take viewer demand into consideration when choosing digital subchannels. Here in Phoenix, there are two subchannels dedicated to weather, but no sign of Antenna TV. Some stations think the future is in mobile ATSC M/H, but I still believe subchannel networks with programming people want to watch will make more money for the stations.
LOCALPOWEREDTV Nickname posted a year ago
No Headaches Multicast Subchannel - Starting at $75K http://www.tonercable.com/Products/DOT2/
FlashFlood Nickname posted a year ago
All the subchannels mentioned, except for Cozi TV, are available here in Orlando. We don't have The Cool TV or The Country Network here, and the 3 newest ones (Live Well Network, Movies!, and Bounce TV) are not yet on Bright House.
Phil Kirk posted a year ago
I purchased a used Antenna Direct antenna and I get all NY/NJ stations clear as a bell in Nassau County, Long Island. I have it hidden in a pine tree about 10 feet off the ground. I have written the local papers to please publish the Diginets programming line-ups. I am waiting for their response.
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Ratings

Overnights, adults 18-49 for December 17, 2014
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Source: Nielsen
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