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The Digital Pace

With a full digital TV world around the corner, a push is on by new digital TV programmers to fill new local TV digital signals—so-called multicast channels. But TV stations may be in no hurry.

“I don't sense the urgency,” says Garnett Losak, VP and director of programming for ad sales representative Petry Media Corp. Losak notes that stations have other worries, such as poorer-than-expected local TV advertising revenues this season for their mother-ship TV stations. “This will cost them some amount of effort and money, all when our business is in a challenging environment.”

“There is no immediacy, but there is certainly long-term opportunity,” adds Ken Reiner, VP of programming for Newport Television.

FCC rules have given stations enough bandwidth in the digital age to provide for one traditional TV station and perhaps two to three local digital signals (depending on whether that TV station goes to high-definition). All of this takes on more importance next February when all analog TV stations are required to change over to digital.

Top multicast TV programmers, according to TV station executives, include Retro Television Network (RTN), a Little Rock, Ark.-based programmer airing classic TV series and movies; THIS TV, a recent MGM-announced effort of mostly older movie content and some TV series; .2 Network, featuring movies and lifestyle programming; Universal Sports, a partnership between NBC Universal and World Championship Sports; LATV and Mexicanal, two Spanish-language channels; and NBC's Weather Plus, which has been on NBC stations and affiliates for some time.

Right now, RTN has about 80 station deals for its programming, which will cover 40% of the country by the end of the year. Universal Sports, which has all nine NBC O&O stations and a couple of NBC affiliates, says it has some 30 million homes so far. TV station executives say THIS TV has 25 station offers to consider, and it expects to get to 50%-70% of TV homes by February. MGM's executives would not speak on the record.

Many multicast TV programmers' financial terms include a no-cash license fee and full-barter advertising deal. Mark Dvornik, executive VP of RTN, says in RTN's case, that comes to six minutes of local advertising for the station and six minutes of national advertising time to RTN.

Dvornik says this arrangement is better than those of most digital TV programmers because RTN can insert all local advertising and some programming, which can save stations money on capital expenditures for new equipment. “We are in essence their master control,” he notes. RTN is ahead of many digital networks, up and running on many stations.

The multicast world is starting its advertising efforts in much the same way as a small TV programmer—with direct-response advertisers, marketers who don't need TV ratings to show results. Few new local TV digital signals qualify for the ratings services. Executives anticipate that many stations will package high-priced inventory on their home outlets, with low-priced inventory on their digital stations to give advertisers better cost efficiency.

Bo LaMotte, senior VP of distribution for Universal Sports, compares these multicast efforts to what new cable networks endured during their startup phase two to three decades ago. He believes that niche sports such as skiing, swimming, track and field, cycling and gymnastics will be a draw year-round.

But Luis Torres-Bohl, president of Mexicanal and Castalia Communications, believes some stations would be making a mistake by taking on programming that already hits the same local advertisers to which they currently sell. That's why a Spanish-language network such as Mexicanal will provide English-language stations with something different, he says.

“It's not general market [advertising money],” Torres-Bohl says. “Remember, this is new money—Hispanic [TV] advertising dollars that have been eating away [at English-language stations].”

While many TV stations are considering outside programmers, some of which offer 24/7 turnkey operations, some TV station operators want to start with a more modest approach. Newport Television's Reiner believes that in the early days of multicasting, there is nothing wrong with repurposing local news and weather content, and then later adding in blocks of programming from new digital players. Bob Prather, president/COO of Gray Television, says his new digital stations are focusing on high school and college sports programming. The stations are already profitable, he says.

Some stations might not do anything initially for their new signals. “You'll have to put up a logo or something, or perhaps your local weather Doppler radar,” says Bill Carroll, VP and director of programming for sales rep Katz Television Group.

Many digital TV programmers expect cable carriage for their TV signals. But even then, 15%-25% of TV homes in each market will continue to have over-the-air customers who can get new digital signals of their traditional TV stations, as well as the new local digital networks.

All this means opportunity, and not only for the short term. “We bought cheap real estate for the future,” Gray's Prather says.

But there are still worries. The biggest concern for stations right now, Petry's Losak says, is “that they will put a [digital] signal into the air and no one will watch it, that viewers won't need it.”