Cable Operators

Scratching for Shelf Space

5/02/2011 12:01 AM Eastern

It’s not easy being an independent programming
network.

Competition for channel-lineup real estate is enormous.
Operators don’t have a lot of money to spend, as programming
costs continue to skyrocket. And pressure from giant
media firms with stables of networks, as well as the leverage
that comes with seeking retransmission consent for
broadcast stations, has prevented many distributors from
adding more traditional-TV content.

While executives with independent networks remain
bullish on the business, they concede that it’s a difficult
environment. They’re under no illusion that obtaining distribution
will ever be easy, they said.

“We have to dance for our dinner every day of the year,”
Ken Solomon, Tennis Channel’s chairman and CEO, said.
“We have added new content, launched an HD channel,
we’re going into [video on demand] and we’ll do 3D if they
want it. All that, and we haven’t raised our rates since we
launched seven years ago.

“We continue to grow — we have about 30 million permanent
customers right now, up from around 25 million a
year ago — but we’re not getting the penetration we would
like.”

NO FREE RIDES

Tennis Channel and Comcast just last week met with a
Federal Communications Commission administrative
law judge over a February 2010 program-access complaint,
specifically Tennis’ claim that it had been locked into a premium
sports tier while Comcast-owned Golf Channel and
Versus were carried on more
widely distributed tiers.

Tennis has also sparred
with Cablevision Systems
about sports-tier carriage,
most notably during the U.S.
Tennis Open, which takes
place in the New York-centric
operator’s backyard.

“No one gets a free ride,”
Patrick Gottsch, founder
and president of the ruralthemed
RFD-TV, said. “We
have to work harder. Our
programming has to be better.
And our customers have
to be more vocal.

“We knocked on doors for
eight years before we got our
first distribution deal with
Dish Network in 2000. Two
years later, DirecTV added
us. Then Mediacom Communications
came to us that
year, because their customers
were asking for us.

“In the last three years
Comcast, Time Warner Cable,
Cox and Verizon have
all cut distribution deals
with us. We have 40 million
customers today and are still growing,” Gottsch said.

Distributors are loath to add channels
that aren’t going to directly help the bottom
line, and some operators aren’t interested
in adding any more linear channels
these days.

“With the hundreds of channels we already
carry, there is little demand at Cox
for new networks,” Bob Wilson, Cox Communications
senior vice president of programming,
told Multichannel News.
“We’re more focused on plans to extend
content to exciting new platforms — ondemand
TV, TV Everywhere/online, and
iPads and other mobile devices — to
strengthen the value of the networks we
already carry.”

That’s not to say that Cox or other distributors
haven’t added new channels to
their lineups in the last couple of years.
For instance, Atlanta-based Cox has
rolled out RFD-TV in several of its systems,
particularly those near or anchoring
rural communities such as Omaha,
Neb., in the past 12 months, according
to Gottsch. And Dish Network launched
RFD’s high-definition channel in March.
Gottsch said he expects additional HD
rollouts in the coming months.

SERVING AFFILIATES

Networks must continually prove they
have a compelling story and strong financial
model to pique an operator’s interest.
Pressure to launch high-defi nition
outlets and expand video-on-demand
offerings is intense.

In 2009, GMC’s distributors asked the
network for an HD channel. GMC, once
known as Gospel Music Channel, didn’t
have one at the time, senior vice president
of affiliate sales Lisa Delligatti said.
But since most of the network’s programming was already
being filmed in high-def, the network was able to
quickly accommodate the distributors’ desires with the
launch of an HD channel.

Today, GMC’s HD channel has more than 5 million customers,
mostly on Comcast, Time Warner Cable and Bright
House Networks systems.

Even after the corporate programming honchos sign
off on a carriage deal, those agreements tend to be nothing
more than so-called hunting licenses that independent
networks use as they venture into the field to
convince regional and local systems to add their programming.

Though the approach requires more legwork and field
personnel, Outdoor Channel executive vice president of
affiliate relations Randy Brown said the network has used
the hunting-license model to secure launches in systems
around the country. By going directly to the local management
for carriage approval, Outdoor has managed to
convince more general managers to distribute the network
than if it depended solely on permission from corporate,
he said.

“We have invested in a dedicated field sales force that
works with regional and local management and we have
had more success going from the bottom up than from the
top down,” Brown said.

MIXING IT UP

Independent networks that offer something different are
more likely to get a meeting with a distributor’s programming
honcho, executives said. For example, Sí TV, which
will relaunch as nuvo TV on July 4, has differentiated itself
from other channels aimed at the mushrooming Hispanic
demographic by delivering its programming in English,
rather than Spanish.

“You have to deliver a unique value to gain carriage in
this environment,” Sí TV CEO Michael Schwimmer said.
“In our case, we focus solely on the Hispanic market. Everyone
needs to know how to serve that market. And what
distributors need to know is that 80% of the growth in that
Hispanic segment is bicultural and most Latinos speak
English.

“Unfortunately, there is a dearth of programming
that appeal to the Hispanic community that is produced
in English,” he added. “We are telling their stories
in their way in English. That is our unique value.”

And because Schwimmer believes Sí TV brings a
unique appeal to viewers, he insists the network be
sold as an expanded digital basic service. Being on a
special Spanish-language tier is not an option, he said.

Most of the executives interviewed for this article
said they want to be on the digital basic tier, even
though many operators have closed the door on the
notion of adding any new linear-branded networks to
their lineups.

So the independent networks offer up compelling
reasons to change the operators’ minds. Some,
like Sportsman Channel, point out that one in three
households participate in outdoor activities — which
makes the channel a mass-market network, not a niche
service. Others, like Tennis Channel, have eschewed
rate hikes, or have offered expertise in social-media
marketing, like Karmaloop TV. And a few, like Outdoor
Channel, have reduced their rate cards for better
placement on the dial.

In the past, Outdoor Channel agreed to be placed on a
sports tier. But Brown said Outdoor has seen a significant
bump in its subscriber counts because distributors, notably
Time Warner Cable and Comcast, have moved the
channel from a tier to digital basic in the wake of a ratecard
adjustment that lowers an affiliate’s rate for broader
carriage.

The distributor may not end up paying
more, Brown said. But the network gets wider
carriage — and more potential viewers —
which translates into better ad rates for both
network spots and those in its affiliates’ local
avails.

LOCAL SUPPORT

Various independent networks provide extensive
local marketing support. For instance,
Sportsman Channel takes its “Hunt.
Fish. Feed.” cause-related marketing program
to various cities throughout the year.
The network connects local hunters and
fishermen with an area shelter or food bank
and brings in the operator as a partner to
feed the homeless.

“We have served over 11,000 meals with this
program,” Gavin Harvey, Sportsman Channel’s
CEO, said. “The local cable partner gets
to share the benefi ts of the hunters’ and fishermen’s
generosity, and we handle the coordination
and organization of the events. We
also market it. It becomes a turnkey event for
the operator.”

Independent networks may not have the
marketing muscle that large, multinational
media companies have at their disposal. Instead,
they offer elbow grease, imagination
and expertise in new areas of marketing.

E-retailer Karmaloop, which aims its sights
at young, tech-savvy consumers, promises to
bring an expertise and foothold in social media
marketing that many distributors don’t
have, CEO Greg Selkoe said.

Karmaloop’s multiplatform strategy appeals
those who want to grab customers in whatever
way they can. The company, a successful apparel
e-retailer, launched original video content on
its website about three years ago, Kate McEnroe,
a veteran cable programmer who has been
tapped to head up Karmaloop TV, said.

Karmaloop will deliver a 24-hour traditional network,
video-on-demand programming and a premium
movie service that can be tiered with similar channels.
Karmaloop TV expects to announce its first affiliatedistribution
agreement later this year, with more to follow
in early 2012, according to McEnroe.

RETRANS FALLOUT

The tricky relationship between distributors and large
media conglomerates is also helping independent networks
get a foot in the door, some executives said. After
years of feeling the pressure from big media firms to
carry their bundled network packages, and after having
to agree to their retransmission consent deals, distributors
are beginning to fight back. Time Warner Cable, Dish
Network, DirecTV and Mediacom Communications have
all found themselves on the retransmission-consent battlefield in recent months.

“Big networks are feeling some pushback and operators
are beginning to fight more for what they want,” McEnroe
said. “Distributors are beginning to listen more to the independent
networks because they offer a new and different
story. The big network-owned projects aren’t getting
the same kind of traction they used to out of the gate. The
independent networks can bring what consumers want
faster, less expensively and more creatively.”

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