Diginets rise to challenge cable, as Wiegel's MeTV reaches 94% U.S. clearance

While media analysts and pay-TV executives have their sights set on over-the-top distribution and pending Title II regulation of the Internet, there is another looming threat looking to bite into cable, satellite and telco video market share.

Quietly, broadcast TV station subchannels--also known as diginets, multicasts or dot-twos--have emerged to challenge pay-TV for viewers and advertising share.

And they're doing this using the same playbook that originally built powerful cable networks like TNT and USA--they're filling their schedules with a combination of Cold War-era shows, low-cost lifestyle-oriented programming and direct-response infomercials.

Perhaps the best example is MeTV, which just announced that its clearance level has reached 94 percent of U.S. homes. According to a Tuesday report in Adweek, the channel is selling national ad time for about 20-30 percent of what is typically netted on a mainstream broadcast network, with powerful buyers like Horizon Media brokering spots for major brands like Geico.

"We certainly don't compare MeTV to ABC, NBC or CBS, but we would compare it to a midsized cable network," David Campanelli, senior VP, director of national TV for Horizon, told Adweek.

Other diginets are growing fast, too. Tribune Media recently revealed that its Antenna TV--another diginet showing archival series like Leave It to Beaver--has reached 75 percent U.S. clearance. Channels including NBC's Cozi TV, Katz Broadcasting's Bounce TV and Sony Pictures Television's getTV are also finding niches.

"It's been a good business since day one," Steve Farber, Tribune's senior VP of operations, told Adweek. The channel is already profitable. "You don't need to be at 75 percent to start making money."

According to Michael Kokernak, president of the multicast consultancy Across Platforms, 60 individual subchannels were launched on full power stations in the second quarter of 2014. That figure rose to 101 in the third quarter and climbed to 155 in the fourth.

"We finally see a range of content, and that's what the industry needed to do," Kokernak told Broadcasting & Cable.

The subchannel business does face challenges. While cable operators offer the subchannels on their program guides, satellite operators refuse to carry them, citing limited capacity.

Meanwhile, broadcasters are being encouraged by the FCC to auction off spectrum, not use it.

"It certainly feels like available spectrum is going to be harder to find in the major markets like New York or L.A.," said Jonathan Katz, founder of Katz Broadcasting and COO of Bounce TV, to B&C. "But over time, that may change as broadcasters adapt certain technical standards that allow for even more robust use of their spectrum."

For more:
- read this Adweek story
- read this TV News Check story
- read this Broadcasting & Cable story

Related links:
Digital TV leading to resurgence in over-the-air television
FCC pitches broadcasters to participate in incentive auction, offering billions as a reward
L.A. TV stations show broadcast channel sharing for 600 MHz auction is possible

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