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Congloms Firing Up New Cable Channels as Climate Improves

The death of linear television startups has been greatly exaggerated

A spike in construction of new homes is always seen as a sign of an improving national economy. The same is true for channel launches.

A new channel is fundamentally an expression of faith — belief on the part of entrepreneurs and investors that there’s an audience to serve and money to be made, somehow, with whatever program slate has been concocted.

There’s no shortage of faith in the TV realm this year, which has yielded a bumper crop of new cable channels. A hardy few are being created from scratch as startup ventures (ABC News/Univision’s Fusion, Sean CombsRevolt TV, Robert Rodriguez’s El Rey Network) but most have arrived as remodelings of existing outlets that had some distribution in place already: Fox Sports 1, FXX, Al Jazeera America, Participant Media’s Pivot.

But wait — weren’t we hearing just a few years ago that the era of linear channel launches was over? That everything was migrating to broadband distribution, while traditional multichannel video programming distributors were maxxed out on the number of channels they were willing to pay for?

Clearly, those predictions were premature. In this era, even with YouTube seeding broadband channels by the dozens, there is no more prized asset for a major media conglom than a linear channel, in the U.S. or beyond. The opportunity to put roots in the ground for an entity that, if successful, will throw off subscriber fee revenue and advertising coin (in most cases) for years and years is the equivalent of getting a deal on beachfront property. Even if you have to do a tear-down in a few years (a la Speed turning into Fox Sports 1 or Current TV morphing into Al Jazeera America), it’s the deed to the land that matters most.

The erstwhile News Corp. had been plotting the national Fox Sports outlet and FX spinoff channel for years. The timing of the takeoff of those ventures became right this year for a number of logistical factors, but overlaying it all was the improvement in the U.S. economic climate. That gave the newly minted 21st Century Fox the confidence that there would be enough advertising support and MVPD cooperation (if begrudgingly) to get Fox Sports 1 and FXX up and running in a healthy way from the start.

For traditional media players, the linear vs. broadband channel calculation hinges on the fundamental dilemma that digital-only businesses still produce a fraction of the money that can be made on an old-fashioned channel. Last fall, ABC News and Univision quietly birthed Fusion, the news and lifestyle outlet aimed at English-speaking Hispanics, as a digital venture. But the linear channel component, set to bow Oct. 28, was always part of the plan, because that’s where the real money is and where the biggest impression on the target aud can be made.

MVPDs moan that it’s the plethora of startup and spinoff channels from Big Media — not just the cell division among sports outlets — that drives customer bills so high and keeps talk of “a la carte” legislation alive in Congress. (If there’s one thing distribs and programmers agree on, it’s the need to quash any effort to bring a dim-sum model to subscription TV services.)

The channels business is great for Big Media, which has the clout to hammer MVPDs into submission. Smaller players face bigger hurdles, naturally, but the dream of creating the next cash machine akin to Bravo or Food Network keeps well-heeled outfits like Participant Media in the game. Comcast, at the behest of the FCC, is giving a leg up in cable distribution support to indie ventures (including Revolt TV and El Rey, both bowing later this year) as a condition of its 2011 takeover of NBCUniversal.

The flurry of activity in the linear space doesn’t mean that the majors have taken their eye off the promise of broadband. At the Sept. 3 launch party for FXX in Hollywood, as Robin Thicke entertained the crowd, execs were already focused on the company’s next big launch: FXNow, an authenticated broadband service (read: FX’s rendition of HBOGo) set to bow in November. Blurred lines, indeed.

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