Digital TV widens viewer choices, broadcaster profit chances

Remember when there were only three network broadcast stations in Las Vegas and other cities, and networks held a virtual monopoly on programming?

Back then, a television station was a license to print money.

But those days have gone the way of Monday night appointment TV for "M*A*S*H."

Today there are more than two dozen broadcast stations in the Las Vegas Valley alone. They compete against one another and a seemingly unlimited number of cable channels for slivers of market share.

"There has been a shift in television viewing habits," said Francisco Menendez, chairman of the University of Nevada, Las Vegas' film department. "It's moving away from appointment viewing. People are watching television on their own terms."

Menendez said viewing habits have expanded beyond shows broadcast on digital networks, cable and traditional networks to programs saved on digital video recorders and streamed on services such as Netflix, Hulu and iTunes.

The country's switchover from analog to digital broadcast signals three years ago brought additional stations. More channels meant more programming; stations needed to program the digital subchannels created in the bandwidth space formerly occupied by their analog signals.

Many local stations opted for weather reports, movies and classic TV shows, though some carry fresh content, such as sports.

Digital subchannels offer local stations the opportunity to earn more revenue from existing assets, such as reairing profitable local news programs. Given the sluggish economy, local stations seem eager for additional advertising revenue and these channels represent more inventory to sell.

Still, most subchannels are not yet profitable.

"Most of them still have an audience under 1 million," said Lucy Hood, executive director of the Institute for Communication Technology Management at the University of Southern California's Marshall School of Business.

She said the economics of these digital networks are tiny and they've not had much effect on the television business. Hood, former president of Fox Mobile Entertainment, said viewership and profitability would increase if more people got rid of cable.

According to a survey by USC's Institute for Communication Technology Management, 11 percent of people consider cutting the cord to cable television annually. Hood said the number who cut the cord is less than 5 percent.

DIGITAL EXPANSION

Despite a lack of profitability, several digital networks have landed in Las Vegas.

Antenna TV is a digital network owned and operated by Tribune Broadcasting with classic programming including "Adam-12," "All in the Family," "Benson" and "Barney Miller."

Retro Television Network programs shows such as "Greatest American Hero," "Magnum P.I." and "Quincy M.E." There is also My Family TV offering movies, comedy, sports, travel, children's and healthy living programming.

Atlanta-based digital network Bounce TV is gaining traction with broadcasters nationwide, including KGNG-TV, Channel 47 in Las Vegas, with its programming targeting an African-American audience.

Bounce TV, which recently completed its first year in business, announced plans to become Nielsen-rated, and also announced new advertiser, movie and sports rights agreements. The network said General Motors and Chrysler will become sponsors for two years.

Nissan and Toyota have also renewed sponsorships. A deal with Lionsgate will bring movies to the network and a renewed sports rights agreement with Urban Sports Entertainment Group means college football and basketball games.

Bounce TV targets African-Americans primarily between the ages of 25 and 54. Bounce TV is already seen in 80 percent of African-American homes and more than 60 percent of U.S. television households.

KGNG has taken it a step further than most Las Vegas stations.

"We are pushing the envelope with eight channels," KGNG owner Larry Hunt said.

He said it cost just less than $500,000 to make the switch from analog to digital.

"We made all the money it cost to build the station back in 18 months," Hunt said. "My expectations were conservative. We've done better than expectations."

Hunt said his company is profitable. He declined to discuss advertising rates, except to say the station's ad costs were a better buy than network-affiliated stations in Las Vegas in terms of viewers reached.

KGNG, a Home Shopping Network affiliate, is the first and only digital TV channel in Las Vegas to broadcast eight subchannels. Those channels are: HSN, Spanish-language Aviva-TV, Bounce-TV, Retro Television Network, Movies +, My Family TV, VMas and Korean-language Arirang-TV.

"When we started in 1995, our goal was to be an Asian-language station," Hunt said. "We've wanted foreign language. Our angle is niche we serve certain parts of the market."

MEASURING THE AUDIENCE

But a question remains: How many residents still have a TV set with rabbit ears or a more sophisticated digital TV antenna to watch free digital signals?

Hunt estimated 25 percent of Las Vegas residents watch over-the-air digital. He said his stations are also available on Century Link's Prism TV and through several other distribution channels.

The business model for digital subchannels is unproven, but that's because the business is still in its infancy. Some networks with as-yet small audiences don't charge stations for carrying their programming.

The revenue stream for most networks also isn't there right now.

"I would say for now the industry is still in investment mode," USC's Hood said.

Hood said viewers won't see "million-dollar content" on digital networks. But she said networks do view the stations as another revenue stream.

The television business has suffered in recent years from rising production costs and modest revenue growth.

Digital television has brought many real benefits. Over-the-air broadcasts now have DVD-like picture quality. And consumers get more free channels.

The reason for additional channels is technology called multicasting. Basically, digital signals are more efficient than analog signals, so stations can create several subchannels and fill them with separate programming on the same signal.

"The cost is barely more than running an analog station," Hunt said. "We make a lot more money."

Las Vegas' NBC affiliate, KSNV-Channel 3, for example, has different programming on Channel 3, 3.1 (the digital version of 3), 3.2 Untamed Sports and 3.3 Antenna TV.

SUBCHANNELS ABOUND

Twenty-one Las Vegas-area stations now deliver a digital signal, with 12 offering multiple channels. Stations are not required to program their subchannels, according to the Federal Communications Commission.

KVVU-TV, Channel 5, the local Fox affiliate in Henderson, carries an all- weather station on digital subchannel 5.2. Other discoveries included the "Create" channel on 10.2 and "VMe" on 10.3, both from public television station KLVX-TV, aka VegasPBS. KTNV-TV, Channel 13 carries the "Live Well Network" on 13.3.

An analysis of digital TV station programming offerings by Charlottesville, Va.-based media research firm SNL Kagan found that the total number of live over-the-air broadcast channels for the 1,726 full-power digital stations in the U.S. jumped to 4,552 in 2011 from 2,518 in 2010.

That increase has a lot to do with the expanded network programming options from new startup networks such as Antenna TV, Bounce TV, Live Well, This TV, Me-TV, The Country Network and others expanding their reach to more than 600 stations.

Spanish-language digital TV availability over the air has nearly doubled to 216 multicast channels with offerings from Hispanic broadcasters Azteca America, Estella TV Telemundo, Telefutura and Univision, according to the 2012 SNL Kagan TV Station Database.

Contact reporter Chris Sieroty at csieroty@reviewjournal. com or 702-477-3893. Follow @sierotyfeatures on Twitter.