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Wily Indies Succeed on Digital Channels Where Majors Struggle

It’s the TV equivalent of undeveloped beachfront property, but so far only a handful of ritzy hotels have sprung up.

The recent decision by the ABC owned stations group to pull the plug on its Live Well Network in January shows how little progress has been made by the industry’s largest station groups on developing digital multicast channels.

With the transition to all-digital broadcasting, full-power stations can beam out as many as four digital channels in addition to the mothership signal.

Despite the wealth of programming resources at the major media congloms, the most successful digital multicast efforts to date have come from independent outfits. The Big Four O&O groups have experimented, in varying degrees, with different options but nothing has taken off in a big way.

The business model for digital multicast is in flux but it’s clear there’s a syndication-esque market for 24/7 program slates packaged into niche advertising-supported channels that are offered to other stations on a market-by-market basis.

CBS has yet to go public with a multicast plan. NBC has tried several efforts, most recently a channel dubbed Cozi TV devoted to vintage TV shows and movies. Fox last year partnered with Chicago-based Weigel Broadcasting to launch the Movies! service, a channel tailored for classic film buffs.

ABC was able to get the distribution of the Live Well lifestyle channel up to 64% of U.S. TV households. Most of Live Well’s programs were produced inhouse at ABC’s eight O&Os, which meant they could keep Live Well’s operating costs low.

Industry insiders figure that the major groups are so preoccupied with the pace of change at the local and national level that they don’t have the time to innovate in the multicast sandbox. In other words, it’s hard enough to program the primary channel, let alone worry about drawing a crowd to three or four startup outlets. And the moneymaking potential of multicast channels is still limited by a number of factors, which also doesn’t provide a lot of incentive for larger companies to invest in the space.

That has opened the door to entrepreneurs like the founders of Bounce TV, which targets African-American viewers in the 25-54 age range. Bounce has grown over the past three years to reach 72% of U.S. TV households (and 89% of African-American homes).

Weigel Broadcasting’s vintage channel MeTV has been one of the most prominent digital success stories. The service is lovingly programmed for TV buffs with indelible shows that don’t require much marketing to draw a reliable breed of couch potato: “I Love Lucy,” “MASH,” “Cheers,” “Gilligan’s Island” et al. MeTV, which went national in 2010, reaches 91% of TV households across 161 affiliate partners.

Weigel keeps seven minutes of advertising time per hour, while affils get five minutes. MeTV is broadly carried on local cable systems, but it doesn’t receive direct carriage fees, which means profits are dependent on ad sales. Fortunately, ratings have been growing.

Weigel’s success with MeTV convinced Fox to give the company the keys to its film vault to launch “Movies!” which also licenses titles from Paramount and Sony Pictures. (In 2008, Weigel launched a movie channel, This TV, with MGM which has since been taken over by Tribune Broadcasting.)

The track record of digital multicast outlets to date proves that these channels need care and feeding just like any other outlet. Weigel invested “tens of millions of dollars” in licensing just the right mix of oldies but goodies, says vice chairman Neal Sabin.

“MeTV has compelling brands. We have (the TV equivalents of) Coke, McDonald’s, Apple,” he says. “We knew we weren’t ever going to succeed unless we had a significant number of the best programs ever produced for TV.”

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