Multicast Madness TV Stations Slow to Add Digital Broadcasts As Internet Distribution Revenue Rises
By Steve Donohue MultiChannel News 6/26/2006 http://www.multichannel.com/article/CA6346618.html In this story: PREEMPTIVE OUTLETS STILL SEEKING MANDATE HANDFUL OF HOPEFULS WEATHERING THE FUTURE GETTING MULTI-PAID When television stations owned by NBC, CBS and other broadcasters first began transmitting digital-TV signals in 1998, the concept of multicasting squeezing up to four networks into space previously occupied by a single analog channel seemed like it could revolutionize the TV business. Some stations quickly jumped on multicasting to offer viewers local news and weather channels or even broadcast up to four March Madness college basketball games simultaneously. Now, the Big Four TV networks and stations have instead chosen to distribute programming directly to viewers via the Internet. Rather than repeats of 24 or Desperate Housewives showing up on multicast channels, ABC, Fox, NBC and CBS have turned to platforms such as Apple Computer Inc.s iTunes Music Store and their own Web sites in fresher bids to drive new subscription ($1.99 downloads) and ad revenue. All the major networks have deals with iTunes, and are looking to boost ad revenue through the Web. ABC is streaming Lost and other hits on ABC.com with a single sponsor for each show; Fox is making 24 and other shows available on News Corp. sister MySpace.com for $1.99 apiece; and CBS recently began distributing original entertainment videos on an innertube broadband channel on CBS.com. Why funnel programming through the Internet, instead of targeting viewers watching TV in their living rooms? About 70% of Americans rely on basic-cable subscription packages to watch broadcast networks. The only way for viewers to get HDTV and multicast networks over the air from broadcast towers is with a rooftop antenna and a digital-broadcast receiver, the latter can cost up to $500. I think people were very hesitant about going back to the days of antennas, said John Harris, director of programming at Raleigh, N.C., CBS affiliate WRAL-TV, owned by Capitol Broadcasting Corp. PREEMPTIVE OUTLETS WRAL-TV is a multicasting pioneer. Its distributed up to four National Collegiate Athletics Association mens basketball tournament games simultaneously on multicast channels carried by Time Warner Cables Raleigh, N.C., division since 2000, and it also distributes 24-hour news and weather channels. But Harris says the multicast channels havent generated significant ad revenue for the station. WRAL relies more on its multicast channels as an outlet for programming it cant fit on its analog channel. When a major storm hit Raleigh last month, the station preempted its analog channel and moved As the World Turns and other CBS soap operas to a multicast channel. But the Big Four networks and stations for the most part are holding their best content for Web distribution, with some executives saying they believe they can reach more viewers nationwide on the Internet than they can through the TV, since most cable operators only carry a stations primary signal. If people are going to put time and energy into creating a channel, at the moment, why not create it for the Internet instead of waiting for multicast? said a senior executive at a Big Four network who asked not to be identified. STILL SEEKING MANDATE NBC and CBS executives have argued that cable operators should be forced to carry every digital signal from local stations, which is the key point of the multicast must-carry debate. The Federal Communications Commission was expected to pass a digital must-carry mandate last week, but chairman Kevin Martin pulled the scheduled vote after failing to gather support from the majority of commissioners. Cable operators have argued that a mandate to carry dozens of digital multicast channels from broadcasters would clog channel capacity, and threaten existing networks on their lineups. And cable programmers facing the prospect of competition from multicast channels have also balked at calls for digital must-carry. Multicast must-carry is infuriating because broadcast programmers dont have to prove the worth of their new channels to pay TV distributors, Oxygen Media CEO Geraldine Laybourne said at the Society of Cable Telecommunications Engineers Cable-Tec Expo in Denver last week, arguing that must-carry would give broadcasters an extra advantage. NBC has attempted more with multicasting than rival broadcasters, launching local NBC Weather Plus channels produced by NBC stations and affiliates in 85 markets. And through retransmission-consent deals struck with Comcast Corp., Time Warner Cable, Cablevision Systems Corp. and other cable operators and telcos, NBC Weather Plus counts about 20 million subscribers. Its not clear how much ad revenue NBC Weather Plus generates. Officials at NBC declined to comment. Other major broadcasters say the lack of distribution of multicast networks on cable systems makes the Internet a more attractive platform to distribute programming. Theres a bit of a creative chicken and an egg problem If there were more avenues for multicast carriage on cable, I think you would see many more [network] ideas spring forward, a senior network executive added. HANDFUL OF HOPEFULS But even without a so-called multicast must-carry mandate, a handful of programmers are developing new networks, including weather, lifestyle and music channels. Since its debut in May 2005, AgU Entertainments The Tube Music Network has cut deals with station group owners Sinclair Broadcast Group Inc., Raycom Media Inc. and Tribune Broadcasting, which allow it to reach 74% of TV homes via broadcast signals, AgU vice president of distribution Mike Ruggiero said. Rather than pitch their music network for distribution to cable and direct-broadcast satellite providers, The Tube opted to partner with broadcast station groups, counting on retransmission consent deals those stations can cut with local operators to secure a spot for the multicast network on cable systems. The Tube is now available in about 4 million cable homes through multicast carriage deals broadcast affiliates have cut with cable operators, including Comcast Corp., Time Warner Cable, Cox Communications Inc. and Charter Communications Inc.. Ruggiero said The Tube shares ad revenue from its network with its broadcast affiliates. Cable affiliates dont pay license fees for the channel, and operators benefit from promotions local broadcast stations run for The Tube which direct viewers to watch the network on digital cable. It gives cable operators access to [a stations] high-definition service, and it gives the cable operators access to free programming. In addition, that local broadcaster is going to promote the heck out of it [The Tubes availability on digital cable] in every one of their spots, Ruggiero added. The Tubes largest broadcast launch came earlier this month, when Tribunes WPIX-TV station in New York rolled it onto channel 11.2. The Tube hasnt yet cut a deal to distribute the channel on Time Warner Cables New York system, but Ruggiero said hes very confident that the 1.2-million-subscriber system will carry it out later this year. One top executive at a major broadcast network said he believes Comcast, Time Warner Cable and other operators are resisting reaching multicast programming deals with stations since they are concerned about the services competing with their own networks, such as Comcast regional news channel CN8 and Time Warner Cables New York 1. Officials at Time Warner Cable and Comcast declined to comment last week. WEATHERING THE FUTURE Most early multicast programming efforts have focused on news and weather programming. In addition to NBC Weather Plus, theres AccuWeather Inc.s Local AccuWeather Channel, a multicast channel distributed by ABC owned-and-operated stations. AccuWeather executive director of media sales Brian Kisslak said the company expects to announce market tests with other major [station] groups within the next 120 days, but AccuWeather and ABC havent yet reached deals to distribute the weather service on any digital-cable systems. In the long run, AccuWeather, which also supplies weather information to newspapers, mobile phones, TV programmers and Web sites, may generate the bulk of its revenue from new media platforms. There are so many emerging platforms right now I think the best thing about AccuWeather is our portfolio is in every one of these markets. If they all converge, we all succeed. If some stay and some go away, we succeed, Kisslak said. None of the Big Four broadcast networks have developed entertainment programming for multicast distribution, but CBS executives disclosed last year that the company was considering distributing entertainment programming, such as outtakes from series such as Survivor, through a multicast channel called CBS.2. No launch date has been set for the multicast channel, and since the CBS.2 announcement, CBS has cut deals with Apple to sell CSI: Crime Scene Investigation and other hit shows on iTunes. The broadcaster also plans to distribute original videos on CBS.com. GETTING MULTI-PAID Unlike the case with The Tube, if CBS moves forward with CBS.2, it could demand license fees for the channel from cable operators by trying to package the network in retransmission-consent deals. When you add a CBS 2, 3 and 4, arent you going to get paid for it? We are. Advertising new forms of advertising. This includes product placement, program integration, and micro-programs, and finally, video on demand. Within the next few years, if not sooner, you are going to see us getting paid on VOD for our top-quality, premiere shows, CBS president Les Moonves said at a Merrill Lynch conference. Under current rules, broadcasters that elect must-carry over retransmission-consent are entitled to distribution on a cable system, but cant demand fees for the content. Top executives at CBS and NBC have said publicly several times that they want cable operators to pay them cash in exchange for rights to carry their networks, just as operators pay license fees to carry cable networks such as ESPN or MTV: Music Television. The Tubes Ruggiero, a former Cox executive who also negotiates retransmission-consent deals between broadcasters and cable operators through a privately held consulting firm, said he believes video on demand could help resolve disputes involving multicast network distribution. With most current retransmission-consent agreements between major operators and Big Four station groups set to expire beginning in 2008, Ruggiero said finding a way for operators to run on-demand programming from broadcast networks, and share the ad revenue from the shows with stations, could help operators add multicast networks and VOD broadcast shows to their lineups. Everyone [broadcasters] would love to have license fees, no doubt. But all a license fee is is incremental revenue. If I can bring in other incremental revenue schemes or plans that bring incremental revenue to broadcasters, Im serving the same purpose that I would for asking for cash, Ruggiero said. ================================================= George Antunes Voice (713) 743-3923 Associate Professor Fax (713) 743-3927 Political Science Internet: antunes at uh dot edu University of Houston Houston, TX 77204-3011 Reply with a "Thank you" if you liked this post. _____________________________ MEDIANEWS mailing list [email protected] To unsubscribe send an email to: [EMAIL PROTECTED]
