Network takes aim at digital surplus: Firm to sell programs for unused TV channels

September 26, 2005

Multicast Networks Group LLC plans to launch the network in 2006, said industry veteran Michael Ruggiero, who heads the 22-year-old ALL TV Services communications consulting firm.

"We know the industry needs more content. Broadcast groups we've talked with are very excited about the concept," said Ruggiero, chairman of Multicast.

Ruggiero also is vice president of distribution for The Tube Music Network, developed by MTV co-founder Les Garland. Ruggiero recently helped broker a deal to run The Tube on digital channels in 29 Raycom Media Inc. TV markets, including Cincinnati and Memphis.

Ruggiero is entering an uncharted and dangerous frontier, however, one that could soon be thundering with digital offerings by networks to their station affiliates.

Stations are growing impatient watching dust settle on their digital broadcast equipment. Stations typically use one of their digital channels to broadcast digital versions of their conventional transmission, and some use one or two for a replay of local news or weather.

"We've gone through millions of dollars without any revenue against that. We're all scratching our heads trying to make a buck off of it," said Don Lundy, vice president and general manager of WRTV Channel 6.

Ruggiero said for competitive reasons he's not quite ready to elaborate on programming that will run on Multicast Networks. The content would be produced by any number of video production companies around the nation.

The key is the programming will be suited to the higher-quality signal of digital TV, and Ruggiero's betting TV stations and some cable companies will snap it up.

Excess channel capacity

Specifically, he's targeting the two or three digital channels most TV stations can squeeze out in addition to their primary high-definition TV [HDTV] channel already in use.

In anticipation of the federally mandated conversion from today's analog broadcasts to all-digital by the end of this decade, most every station is already broadcasting in digital.

That digital signal has a capacity of 19.34 megabits of data per second-more than enough for the 14-megabit HDTV broadcast. The extra 5.34 megabits is what Multicast Networks wants to fill with programming-in the form of up to three separate digital channels. Splitting this extra bandwidth into multiple channels degrades picture quality, but it's still better than analog.

Few TV viewers can access digital channels; only 11 percent of U.S. households have high-definition-capable televisions or set-top decoders, according to JupiterResearch. That number should grow to 20.4 percent by year-end and hit nearly 52 percent by 2007, according to Monterey, Calif.-based Kagan Research.

Broadcasters have invested hundreds of millions of dollars in recent years on digital hardware. For example, Providence, R.I.-based LIN TV Corp., which owns 23 stations including WISH-TV Channel 8 in Indianapolis, spent $84 million for digital equipment.

WISH currently uses spare channels for weather information.

"Quite frankly, it's stranded capital," said Scott Blumenthal, vice president, television, LIN TV.

WRTV uses one of its spare channels for local news recaps.

"We have been looking at several business models trying to decide what to do with that spectrum," Lundy said.

While Ruggiero won't say much about his network, he did say "it's like a cable network in look and feel."

Because the network will be broadcast over the air, it will have to meet federal decency standards. One thing he's learned by talking to TV stations so far is "they don't want it to be a shopping channel. They don't want it to be an allinfomercial channel."

Ruggiero said he believes the need for visionary new content has been validated, pointing to The Tube Music Network. It departs from MTV and other existing music channels by offering 50 minutes of music an hour, rather than the mishmash of reality shows and sex-themed flotsam.

TV stations are more concerned about boosting revenue than artistic purity, of course. Stations would generate revenue by selling local ads to run on the Multicast network.

"Local broadcasters have an opportunity to use their multicast spectrum to create a balance between network and locally originated content, giving them more independence and flexibility," said Jon Findley, chief operating officer of Multicast Networks.

He said his network might also present a better financial opportunity for local stations than a network-driven multicast channel.

Multicast Networks would generate income largely from national advertising.

Investors, compelling

programs key

Whatever programming Multicast has in mind, it needs more cash to launch. Ruggiero said the group is trying to raise at least $9 million in its first round. It already has interest from out-of-state investors, Findley said.

Findley's bio lists management jobs at a number of TV stations nationwide and, locally, as former program operations manager at WTTV-TV Channel 4 in Indianapolis. He served as vice president of production and program development for VH-1/MTV Networks in the late 1980s.

Meanwhile, Multicast recently brought aboard as CEO Chip Harwood, who has consulted on startup cable networks and was director of affiliate sales for ESPN's west region.

But the veterans may encounter big hurdles. WISH's Blumenthal said the three major broadcast networks are developing their own programming to fill the digital niche.

For example, NBC recently made available to its affiliates' digital channels NBC Weather Plus, a competitor to the Weather Channel that even displays local weather information during commercials.

Blumenthal also wonders, "Are we going to be able to negotiate multicast offerings to the cable companies?''

TV stations want to see their programs included on local cable systems to boost viewership and ad revenue.

Findley counters that his network's new programming will appeal to some cable systems because they'll get unique content not carried on rival satellite networks.
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