Diginets’ Future May Just Be Now

Related: What's In A Name? Lots, Says Katz

The story stemming from NATPE last month wasn’t the latest celeb trying their hand at daytime TV, but a rapidly growing batch of upstart junior networks showing vintage TV series, black & white film classics and an endless litany of game shows. Call them subchannels or diginets, multicasts or dot-twos—the fledgling networks corralled a hefty portion of the Miami buzz in the wake of several launch announcements and the escalated presence of other channels with a few years’ head start.

“So many stations were behind on diginets,” says Sean Compton, president of strategic programming and acquisitions at Tribune Media. “They said there wasn’t money to be made, or they thought it would compromise their primary signal.”

That’s not the case anymore. While Tribune’s Antenna TV and This TV, as well as Weigel Broadcasting’s Me-TV, NBC’s Cozi TV and Katz Broadcasting’s Bounce TV, have had a healthy head start in the race to sign up affiliates and nail down sticky programming, the arena is getting a whole lot more crowded. Sony Pictures Television’s vintage films net getTV turned a year old last week, while Movies!, a venture between Weigel and Fox, turns 2 later this year. Decades, a classic TV network from Weigel and CBS Television Stations, has soft launched, with a proper debut due for Memorial Day. Weigel is also behind the crime channel Heroes & Icons, which will compete for affiliates and viewers with other rookies such as Katz net LAFF, MGM’s The Works, FremantleMedia North America’s game show net Buzzr and the crime-fighting channel Justice Network.

The diginets, once the baby of the television industry, are on their feet and walking. “Now there’s variety—comedy, game shows, dramas,” says Michael Kokernak, president of the multicast consultancy Across Platforms. “We finally see a range of content, and that’s what the industry needed to do.”

Pay to Play

According to Kokernak, 60 individual subchannels were launched on full power stations in the second quarter of 2014, climbing to 101 in the third quarter and skyrocketing to 155 in the fourth. The first quarter’s launches continue the trend of a massive affiliate grab by the multicasts. Networks can go about that in different ways, essentially leasing time on a station’s subchannel, similar to how networks paid affiliates compensation years ago; or lining up a more partner-minded revenue share with the broadcaster. Networks such as Antenna and Cozi can avoid the paid model because they are launched by station groups; others, such as getTV and Katz Broadcasting’s Escape and Grit, pay for carriage.

The paid model, which might see a network shell out $5,000-$15,000 monthly to air on a major-market subchannel, may be more prevalent than network operators let on. “Everyone wants it for free, but if it’s a market they want, they will pay,” says Kokernak.

‘Direct’ Opposition

Another challenge in the multicast strategy is getting the satellite operators on board, which no diginet has made significant progress with. Cozi TV has figured out something of a work-around by putting its signal on FETV (Family Entertainment TV), which airs on Dish Network. “It’s frustrating,” says Compton. “We have over-the-air, our affiliates get cable, but for some reason we’re not able to crack the code with [satellite operators].”

DirecTV and Dish Network commented via email. “We don’t carry many of them because we have limited spot beam capacity,” says a DirecTV spokesperson.

Adds Dish: “We make value decisions based on a combination of customer interest and the cost of carrying the channels, including infrastructure costs and carriage rates.”

According to a GfK Media & Entertainment study, 14.4% of TV households report over-the-air reception, meaning around 16.8 million homes in the U.S. The pending broadcast spectrum auction is another concern for diginet operators who may be lacking in terms of cable carriage. “Some real estate is absolutely going away,” says Superna Kalle, getTV general manager.“But really, no one knows what’s going on with the auction.”

The landmark event is now slated for early 2016, but repeated delays make some wonder if that will go as planned. “There’s a chance it could be a bloodbath, but literally not one person knows how it’s going to come out,” says Mort Marcus, copresident of Debmar-Mercury, which is helping shop Buzzr. Such uncertainty, he added, would not impede Debmar’s efforts to sell the game show net.

Riches In Niches

The multicast landscape is often compared to the cable world from decades ago, with narrowcast networks, dedicated to movies or sports or music, spawning left and right. Kokernak thinks there are more to come. Neal Sabin, Weigel vice chairman, believes some contraction will happen. “Wait a couple of years and see what the fallout is,” he says.

A thriving Me-TV in, say, market No. 50, with a sales staff trained and motivated to sell dot-two inventory, can do around a million dollars in yearly revenue, says Sabin, though other diginet watchers set the figure much lower. But clearly the more advanced multicasts—Me-TV and Bounce TV stand out in that they are Nielsen rated nationally—are on the radar screen of ad agencies. “They are definitely in the mix of our consideration set,” says Sam Armando, senior VP and director at SMGx. “The audience and price structure is similar to cable.”

With cable ratings showing erosion, Armando adds, “The time may be right” for the upstart nets to have their brands adopted by viewers.

Each multicast net brings its own value proposition to the table. Bounce TV targets African-Americans. Estrella TV and TeleXitos show Spanish-language fare. LAFF has comedies. The newbie Rev’n is for motorsports enthusiasts. “All things that rev,” says David Leach, president of Luken Communications.

Just as TV Land reinvigorated its brand by launching the original comedy Hot in Cleveland in 2010, original programming may be how the diginets ultimately move out of the channel lineup ghetto. The proliferation of classic-show networks has pretty much tapped the reserves of available quality programs (“The ‘A’ shows are all taken,” says one diginet exec), perhaps creating greater need for brand-defining originals. While Decades is built on classics such as I Love Lucy and Happy Days, famed newsman Bill Kurtis will host an original series, Through the Decades, starting in late May. Bounce TV sitcom Family Time averaged 211,000 total viewers this past season, says Katz, who sees originals as a key differentiator. “Some networks are built [on studios’] unsold inventory,” he says. “Being independent, we are able to keep consumers at the front of our thoughts in everything we do.”

While original reality shows on Cozi have not succeeded, Meredith McGinn, senior VP, continues to consider homespun options beyond one-off specials. “I do think there may be opportunities in our future,” she says.

Lived Well

Live Well Network was a compelling case study in multicast originals, airing a creative slate but failing to find enough viewers to make the ABC owned stations’ initiative viable. Competitors would not comment on Live Well’s demise on the record. Privately, they say the programming was not unique enough to stand out from like-minded cable nets, and successfully marketing originals requires a very dominant line on the budget.

Time will tell how many diginets will still be plugging away down the road. After all, .2 Network never launched, and CoolTV and Retro TV have seen precipitous slides in affiliations. “I don’t know if there are too many,” says Tribune’s Compton. “They said that about cable 10-15 years ago, and cable is still adding channels.”

The diginets’ strong showing at NATPE hints at a robust future, believes Kokernak, which may not be far off. “The industry is waking up to the fact that this is a viable opportunity,” he says. “We’ll see if Madison Avenue and ad sales follow suit.”

Michael Malone

Michael Malone, senior content producer at B+C/Multichannel News, covers network programming, including entertainment, news and sports on broadcast, cable and streaming; and local broadcast television. He hosts the podcasts Busted Pilot, about what’s new in television, and Series Business, a chat with the creator of a new program, and writes the column “The Watchman.” He joined B+C in 2005. His journalism has also appeared in The New York Times, The Philadelphia Inquirer, the L.A. Times and New York magazine.