Thursday, August 21, 2014

Terrestrial Superstation Watch

Yet another thread we've been on a long time. In case you are new to the party, there's a long running debate about the audience size of over the air television and its long term viability. Rajiv Sethi and I took the pro side; almost everyone else took the con.

One of the major points of contention came from the fact that the two major publicly available data sources had wildly different estimates of viewership. Nielsen had 9% and shrinking. GfK had 18% and growing. Back in April of 2013, we had a big debate with Felix Salmon over these numbers. I pointed to Fox's and NBC's then recent decisions to launch terrestrial superstations (the superb Movies! and the inept COZI respectively).
Let's assume Salmon's right and put ourselves in the position of a Fox or NBC executive who has to decide whether or not to create a new broadcast network. We can be reasonably confident that the executives have access to reliable data (particularly the Fox executive if the deal with Weigel included a look at some numbers from ThisTV and METV).

You find, given our premise, that the total over-the-air audience is, say, forty million, the technology is obsolete and entire medium will probably be gone in a few years. At this point, it's hard to imagine you'd proceed with an expensive, time-consuming project that is likely to be an embarrassing failure but the situation actually gets worse.

You are looking at launching an advertiser-driven, English-language station but the OTA market is disproportionately poor and immigrant (I get programming in over a half dozen languages); the maxim relevant audience for your station now drops to maybe thirty million and there's more bad news. You're going to have to share that thirty million with a crowded field of competitors. A major market will have dozens of OTA channels including multiple PBS channels, This, ME, Antenna, Bounce, RTV, three ION channels and various independents.

Given Salmon's assumptions about the size and trajectory of this market, there is simply no way NBC or Fox would have gone ahead with these channels. They couldn't possibly recoup their start-up costs before OTA is phased out. Put bluntly, both NBC and Fox are betting against Salmon's position.

Obviously this is not conclusive, but it's a strong piece of evidence and it's consistent with what we've seen elsewhere. It's also consistent with GfK's numbers. 
What's happened since then?

All of the terrestrial superstations mentioned above appear to be going strong.

Sony launched its own virtual clone of Movies!, GetTV.

And now

Exclusive: MGM Launches Digi-Net The Works


  1. These are super-stations, not local stations. Ever since Ted Turner licensed a large film library and used his movies only channel to leverage from broadcast into a variety of cable markets, this films first approach has been pretty standard. Even MTV used this approach, starting with music videos and turning into a general entertainment cable channel. This seems to be the strategy here: start with a film library and leverage it into a cable or on-demand (e.g. via Roku or AppleTV) channel.

    Aside from providing a modestly priced beach head, this is not about a revival in over the air television, but rather a tactical move.

    1. First of all, the original question was are the events which we have been seeing more likely under the GFK assumptions or under the Nielsen assumptions? Under the latter (a small, rapidly shrinking market with terrible demographics) your scenario doesn't make any sense. Compared to the other media channels available in the 21st century, setting up a nationwide terrestrial superstation is slow, inconvenient, and costly. What's more, if we accept the Nielsen numbers, all it gets you is a small and often poverty-stricken audience.

      Under the GFK numbers, your scenario of using terrestrial to launch into other channels is entirely reasonable – – I think it may even turn out to be a big part of the story – – but I see that as supporting not undercutting my case. When cable first hit big around 1980, we saw a number of companies use the terrestrial–to–cable strategy but for almost 30 years after that, the practice virtually stopped. Then suddenly about five years ago, it came back and has been continuing ever since

      It is also important to note the extent to which all of these superstations have aggressively pursued the terrestrial market and have branded themselves as doing such.

      Not only did Fox cannibalize its own cable movie channel to start a terrestrial superstation; it actually went into equal partnership with the much smaller Weigel Broadcasting (Weigel is basically the Turner of terrestrial superstations). Tribune broadcasting even went so far as to name its initial terrestrial superstation Antenna TV. From a branding standpoint that is one hell of a commitment.

    2. I also should have noted that if NBC/Comcast were just looking to launch a cable network, they probably could have found a more direct way of doing it.