Cover Story: Sole Survivors


The economic downturn has hit every media-industry giant, with layoffs, write-downs and anemic stock prices all testifying to the barren reality before them. But another group of TV companies say the storm has hit them just as hard — if not harder.

Independent programmers — those unaffiliated with any media giant — have always found it tough to strike distribution deals. But now they say the doors aren't even open to them.

In addition to the economic downturn, so-called indies claim several reasons for the current stonewalling: Big media companies still favor programming they own and there's a lack of bandwidth for standard-definition programming.

Perhaps more than anything, distributors are focused more than ever on newer products, including telephone and Internet services, rather than video.

“It's a different animal right now,” Jeff Paro, president and CEO of Sportsman Channel parent Intermedia Outdoor Holdings, said of the market for independent cable networks. “We have great ideas for reaching specific audiences right now, but with [ongoing] retransmission-consent talks and the [carriage dispute involving] NFL [Network], a new sports channel is not a top priority.”

Many small programmers are loath to question the motives of distributors, but executives of San Diego-based Wealth TV are vocal in asserting discrimination by operators, who favor networks in which they hold equity over independent voices — even when those unaffiliated channels are offered without license fees. Both Time Warner and Comcast own stables of cable networks.

In other cases, independent programmers contend that media companies that own multiple programming services — such as NBC Universal, The Walt Disney Co. and Viacom — require affiliates to purchase a suite of networks to gain access to their most popular services.

Fighting that alleged discrimination is tough, say independent programmers, because Federal Communications Commission procedures to deal with such charges are open-ended. Small programmers rarely have the funds to wait years for government intercession.

Wealth TV has filed an FCC complaint against Time Warner Cable, alleging that the operator carried a channel in which it had a financial interest — the now-shuttered Mojo (owned by In Demand Networks, in which TWC is a partner) — rather than negotiating fairly for the all HD, fee-free Wealth TV. (Wealth TV now charges a “minimal, highly competitive” license fee, said president Charles Herring.)

But despite 150 affiliation agreements, Herring said, his channel is not near the 20 million households it needs to be viable. It has been unable to reach large-scale affiliation agreements with such major operators such as Time Warner Cable or Comcast. And with no coverage in the major markets those MSOs control, such as Los Angeles and Chicago, it's nearly impossible to sell national advertising, Herring said. (Wealth TV does have carriage agreements with Charter Communications and Verizon Communications.)

Discrimination against non-aligned networks is “real and needs to be addressed,” said Herring. Wealth TV's growth has also been hampered because small operators' systems are full of channels distributed by the big media companies, which those operators are forced to buy in order to get the channels they actually want, Herring added.

So why did Wealth take a regulatory path that's expensive and alienates operators? Herring said that' s because federal law lacks a so-called shot clock requiring the FCC to act on complaints from programmers within a specific time period.

“You'd think a shot clock would be welcome by both sides,” said Herring. “If I were accused [of discrimination], I'd want to clear my name.”

Wealth's carriage agreement complaint is still pending.

With these challenges, networks are finding other ways to grow, or at least survive, in this troubling economy. Several said overbuilders and competitors such as Verizon and AT&T have been their salvation, for these alternate providers will add niche networks as programming differentiators from incumbent providers.

“We got on Verizon very early on,” said Steve Severn, CEO of the male-targeted MavTV. “They looked at independents that weren't available on cable.” The Verizon pact helped Mav get on Cablevision Systems, he added, because the telco was pushing hard into Cablevision's New York City-area territory.

Tenacity is a required skill to be an independent. “The longer we stay in business, the easier it is to wear down the distributors so they know you're not going to go away,” he said.

Some networks are depending heavily on non-cable partnerships to provide revenue until they can achieve the broad distribution that will generate more affiliate fees and draw in national advertisers.

MavTV relies on a partnership with Lucas Oil Products for survival, said Severn. “I can't imagine 2009” without this partnership, he said.

Lucas Oil creates 100 hours of content for MavTV, ESPN and Versus each year, building its products into the programming.

MavTV is only in 7 million U.S. homes and actually has a broader footprint abroad — it reaches 9 million homes via United Kingdom satellite-TV firm BSkyB and 1 million households in Canada. That international distribution “subsidized our U.S. life,” said Severn.

Horse Racing Television relies on the continued financial support of its owners — Churchill Downs and Magna Entertainment, owner of several racetracks, including Santa Anita Race Track in California — to keep a “very lean” operation going until it can grow large enough to attract mainstream advertisers.

“Misperceptions” that horse racing is all about gambling have also hampered 16 million-subscriber HRTV, said senior vice president of distribution and business development Chris Swan. But the network focuses on good “horse stories,” such as the fate of Barbaro and Smarty Jones' attempt to win the Triple Crown — not wagering — he noted.

HRTV's growth is also hampered by the fact it isn't in high-definition, and with uplink facilities in multiple track locations, that's an innovation “that's not going to happen anytime soon,” he said.

The Sportsman Channel, in 15 million homes, is also relying on its corporate partnerships — in its case, for marketing support and data it can use to convince operators of the value of its audience. Intermedia Outdoors publishes 17 magazines, all of which are No. 1 or 2 in their segment, and operates 24 Web sites. That gives his channel a potentially massive promotional machine, Paro said.

But that marketing muscle may be the good and bad news in distributor discussions. That means Sportsman must be vetted by both the programming and marketing executives of a potential distributor, slowing down the process of getting a 10-year carriage deal, he said.

Sportsman is also getting the “we don't have the bandwidth” argument, he said.

Distributors also play providers of sports content off of one another, added Outdoor Channel chief operating officer Tom Hornish.

“As a quality producer, I can't match low-cost providers and keep quality production,” he said.

Outdoor, with about 30 million subscribers, has also modified its rate card as it approaches renewals, providing incentives for broad carriage.

“Equity is always on the table if it makes sense” for a distributor to own part of the channel, added Hornish.

Equity is obviously a game-changer for Retirement Living Television, which signed a deal earlier this month with Comcast, giving that distributor an unspecified ownership share along with Erickson Retirement Communities. The Comcast/Erickson deal will add 12 million homes to the channel's footprint.

Previously, Retirement Living had been carried for four hours a weekday on CN8, a regional network offered on Comcast systems between Boston and Washington, D.C.

RLTV also has 2 million Verizon FiOS TV homes, according to the channel.

In an interview before the equity agreement was worked out, general manager Patrick Baldwin said the two-year old-channel was growing slowly because affiliation talks centered on “organizational synergies,” such as how operators could use demographic information supplied by RLTV's partner, the American Association of Retired Persons, to improve sales to the 50-plus demographic.

Some operators “can't see how a new, non-sports network can drive return on investment,” he said, adding that channel executives must prove they are part of a sound business decision.

Unlike other executives, who rue the lack of network-group muscle in their affiliation talks, Baldwin said he liked coming into talks as an independent, noting recent dust-ups over contract renegotiations between Time Warner Cable and Viacom.

“I can talk as a partner, not an antagonist,” said Baldwin. “I don't envy [network group affiliate sales people] at all.”

Rural themed RFD-TV will be expanding this year via international deals, said founder and president Patrick Gottsch, who said stateside operators have blamed the economy for launch delays.

RFD-TV (40 million subscribers) has revived some of the favorite programming from the “old TNN” — i.e. The Nashville Network, now Spike TV — such as shows hosted by Ralph Emery and country-music talk show Crook & Chase.

Gottsch said a “best of RFD-TV” programming block will play as part of a country-music channel on BSkyB beginning in March. Gottsch also believes his channel is close to a deal with DirecTV Latin America.

Talks have even been held with Russian Federation's Department of Agriculture for some programming for an agriculture-themed channel, he said.

BBC America (62 million subscribers) is also contemplating launching a new channel, preschool network CBeebies, said BBC Worldwide Americas president Garth Ancier. It would utilize the library of the U.K. parent channel, including Teletubbies, he said.

A Spanish-language version of CBeebies, exclusively distributed by Dish Network, is already up and running.

U.S. operators are “open” to the idea of the channel, Ancier said. He made no mention of interest from Comcast, which already has a stake in a preschool channel, PBS Kids Sprout.

BBC America had announced plans for an HD channel in 2008. That had been “pushed back” to mid-2009, executive vice president of communications Jo Petherbridge said.

The 2009 outlook for independent networks is mixed. Some — like ReelzChannel, which moved its production facilities to lower-cost New Mexico — have made drastic moves to stay ahead of the economy. Others continue to pursue regulatory battles with potential partners. And some say that in spite of the grim outlook, 2009 will be an expansion year.

For instance, Hallmark Channel (86 million subscribers) said it will expand its original programming slate this year. It will produce 30 original films (the network went to the upfronts last summer selling 20 film properties).

As consumers cut spending, noted Crown Media Holdings CEO Henry Schleiff, they see a stronger value proposition in family-oriented programming such as Hallmark's content. And advertisers in such categories as packaged goods, pharmaceuticals and lower-end retailers have “strongly confirmed” their commitment to buy spots with the channel, he said.

“When you get out of 'cool' New York and L.A., to other markets, [you see] this economy has hurt so dramatically,” Schleiff said. “The value of whole-family viewing at home is important to viewers and distributors.”