Progress Report: The New Nets

Nov 14, 2005  •  Post A Comment


A-After Current presented its unique “viewer-created content” programming concept at its San Francisco headquarters last spring, cable insiders were unimpressed. Co-founders Al Gore and Joel Hyatt were outsiders who clearly didn’t know the cable business, went the critical refrain. Short video “pods” of viewer-created content (VCC) is fraught with inherent problems. The whole idea is a joke.

“[The reaction] was very skeptical,” said CEO Mr. Hyatt. “It was very off-putting to people inside the industry. They wanted to know what network our network will be like, and when we said it wasn’t going to be like any other network, that scared them.”

Then Current debuted in August and the voices of industry critics were replaced by the voices of television critics, who found themselves pleasantly, grudgingly, surprised. Logo and Fox Reality may have monster corporate parents who garner instant credibility, but the best-reviewed, and most influential, new network has been the independent operation that nobody thought would fly.

“Current TV did manage to deliver a major surprise when it debuted this summer,” wrote Newsweek. “Gore’s network was actually, well, kind of good.” The magazine went on to praise the channel for focusing on news rather than news personalities.

And The New York Times wrote: “Current is not a joke. It actually lives up to its billing as a slick, commercial cable network that gives its audience a voice in the programming.”

But from an industry perspective, the most impressive comment on Current was indirect. MTV Networks recently announced it will start pursuing VCC too, and, to press the point, last month announced the purchase of Internet VCC hub iFilms.

“[VCC] is obviously the next wave, and the purchase by Viacom of iFilms is probably the strongest statement that we’re very much on to that,” said MTV Networks Music Group President Brian Graden, who also happens to be president of Logo. “The more control you put of everything into the viewers’ hands in this sort of multiplatform, on-demand age, that’s the only way you’re going to win. So we realized that the sort of one-way viewing experience of television has to be but a part of the portfolio.”

Asked whether Viacom’s recent announcement and the VCC plans were inspired by Current, Mr. Graden said, “Not really.”

Mr. Hyatt admitted the sudden interest by MTV is both flattering and a cause for concern.

“Of course it concerns us, and MTV is not the only one,” Mr. Hyatt said. “We’re now hearing throughout the industry that, holy smokes, these people are on to something. Having said that, it is much harder to do than people realize. We’ve been at this for years. We have a huge head start in understanding how you do VCC.”

On Current’s Web site message boards, viewers are taking the network’s democracy mandate seriously. The community that has sprung up around the channel is unlike the fandom love-hate relationships seen on most network sites, reflecting instead a passionate and literate interest in seeing the network fulfill its idealistic mandate.

“Current will appeal to a much younger-skewing and very unique audience,” said Shari Anne Brill, VP and director of programming, Carat North America. “It opens up tremendous avenues between Internet and television, and it’s a very interesting way to reach out to viewers who want to participate in the viewing experience.”

Added Ed Gentner, senior VP and group director at MediaVest: “Current seems to be a pretty hot network that a lot of people are talking about. It’s a different kind of content than we’ve seen before, so there are risks, but it could also be groundbreaking.”

Despite accolades, some industry insiders are still cautious about the network’s future. Distribution consultant Cathy Rasenberger professed admiration for the network but said growth may be difficult as an independent.

“It’s a network to watch, definitely,” she said. “But there are not a lot of networks growing in leaps and bounds without ownership from Comcast, DirecTV or EchoStar.”

There have been missteps along the way. A plan to hire 50 videographer correspondents resulted in more than 2,000 applications, and then Current canceled the plan, alienating the same amateur filmmakers it was trying to lure. And some have been critical of the amount of repeat footage on the network and the lack of true VCC. As of now, the majority of the network’s footage is produced by Current or by professional production houses.

“It’s a function of how quickly we went on the air. Our repeat factor has been higher than we want it to be, but not higher than we expected it to be at this stage,” programming head David Neuman said. “We were cautious about the VCC concept and didn’t want to set our expectations too high. We estimated we’d have 10 percent of videos VCC, and now it’s at 30 percent and moving up.”

Current at a Glance

Launch: Aug. 1

Owner: Privately held

Top exec: Joel Hyatt, CEO and co-founder

Main carriers: DirecTV, Time Warner New York and Los Angeles

Subscribers: 20 million

Subscribers in 2006 (projected): 28 million

Ad revenue per sub 2005: 22 cents

Ad revenue per sub 2006 (projected): 43 cents

Sources: Kagan Research and Current. Current ad revenue includes the full 2005 year under its former channel space brand News World International.

Fox Reality

B-Reality news articles are updated throughout the day on News Corp.-owned Fox Reality Channel’s Web site home page, but last month the site featured a doozy: “Lower Ratings this Fall for Reality Blamed on ‘Maturing’ Genre, Increased Competition,” declared a story detailing the number of reality series that crashed right out of the gate.

Such predictions of reality doom and gloom don’t faze Fox Reality Chief Operating Officer and General Manager David Lyle-even when they’re on his own Web site. In fact, a sure way to get him energized is to suggest that reality, as the saying goes, ain’t what it used to be.

“I can show you stories going back to 1999 saying reality is over, and they always come out at this time of year,” Mr. Lyle said. “As regular as the leaves turning color in Maine, I can see the stories of reality not doing well and within six months an ‘American Idol’ or ‘Bachelor’ breaks out.”

And he’s just warming up. Mr. Lyle ticks off the reality trends: “First contests are in, then no contests. First hurtful and mean, then wish-fulfillment shows. Dating, then no dating.”

He continues: “If you look at the chances of a reality show surviving versus a new sitcom, it’s much better. [Compared with] a drama? Still pretty good. And when you look at the cost, reality still makes for an extremely good proposition.”

Clearly, reality is Mr. Lyle’s business. Since Fox Reality Channel launched in May, Mr. Lyle has helped stock the network with a variety of former broadcast programs-“Joe Millionaire,” “The Swan,” “Boot Camp,” “Paradise Hotel” and many more. Though there seems to be a preponderance of former Fox shows on the network, Mr. Lyle said no sweetheart deals were made.

“When people see ‘Fox Reality,’ it gives them a misconception,” he said. “People think it’s only Fox product. [But any purchase] has to make commercial sense for all involved. We have pretty much done the same deals for Fox-related product as we’ve done for ABC or NBC. I wish there were more sweetheart deals in the world.”

The Fox brand, however, presumably helped the network land carriage on News Corp.-owned DirecTV. Combined with other deals, the network has 18.5 million subscribers and plans to be in the 20 millions by year-end, a figure comparable with Logo.

The difficulty for Fox Reality is to distinguish itself amid a sea of competition. Bravo, VH1, MTV, TLC, A&E-in a sense most cable networks-are also reality channels.

Fox Reality’s hook is repurpose “big brand” broadcast series. But despite Fox’
s deep pockets, the network neglected to capture the cable rights to two of the biggest and most durable broadcast reality show brands-“Survivor” and “The Amazing Race,” which went to OLN and GSN, respectively.

“‘Survivor’ really happened just before we got ourselves together. That deal was done right when I was coming on board,” Mr. Lyle said. “‘Amazing Race’ we did have discussions about. … I would have liked to have had that.”

The biggest broadcast contender has yet to sell. Fox’s ratings blockbuster “American Idol” is on the auction block. It’s a property Mr. Lyle, who helped develop ‘Idol’ as president of drama and entertainment for FremantleMedia, firmly wants.

“We’re having on-and-off discussions with ‘The Bachelor,’ ‘Apprentice’ and ‘Idol,'” he said.

Asked about Fox Reality’s reputation among producers, Fremantle CEO Cecile Frot-Coutaz described the network as “a player but not a big player.”

“They have a budget; they’re taking pitches,” Ms. Frot-Coutaz said. “They’re part of the Fox family, but they’re also just another client. We’ll know better where they are in a couple years, when they get rated.”

Of the three networks that launched this summer, Kagan Research executives predict the best financial health for Fox Reality.

“I am a lot more bullish on Fox Reality [than Current and Logo],” said Derek Baine, a cable research analyst at Kagan. “I think the ratings at Fox Reality will be at a minimum double either of these.”

Though the channel is expected to earn only $3.4 million in net ad revenue this year, by 2006 Kagan expects Fox Reality to earn $14.3 million, achieving parity with industry averages for a channel of its size and besting Current and Logo.

“The biggest thing they have in their corner is their name and the fact it’s on DirecTV,” said Brad Adgate of Horizon Media. “Fox is a pretty big company, and they could get a lot of help promoting it. They deliver a younger audience, and people understand what Fox Reality is. The questions to answer [are] what shows are they going to have and whether people can find [them].”

For next year, Mr. Lyle plans to seek co-production opportunities to get some original content on the network as well as continue to stock the channel with European versions of U.S. titles, such as “Temptation Island.” Just don’t try to tell him reality is in a tailspin.

“‘Survivor’ is not doing so well-it’s in the 10th season!” he said. “‘M*A*S*H’ wasn’t doing well in the 10th season. Nobody’s going to write that drama is over just because Don Johnson’s show was pulled from The WB.”

Fox Reality Channel at a Glance

Launch: May 24

Owner: Fox Cable Networks

Top exec: David Lyle, chief operating officer and general manager

Subscribers: 19 million

Main carriers: DirecTV, EchoStar, Cox

Subscribers in 2006 (projected): 30 million

Ad revenue per sub 2005: 16 cents

Ad revenue per sub 2006 (projected): 55 cents

Sources: Kagan Research and Fox Reality Channel


B+The most surprising thing about Viacom-owned Logo’s June launch was everything that didn’t happen: No screaming Drudge Report banner decrying the presence of a gay-themed basic cable network, no protesters picketing cable operators, no family values groups rallying the faithful to boycott advertisers.

Coming out of the 2004 election, where a furor over gay marriage was cited as a key factor in conservative voter turnout, every article about Logo fretted that the channel would suffer a conservative backlash. But despite its admittedly historic debut, the reaction has been rather quiet.

If anything, a common criticism is that the channel hasn’t gone far enough-in terms of gay content and national distribution. News reports in a few cities, rather than attacking the impact Logo might have on impressionable children, have run stories questioning why Logo isn’t on locally.

“The channel will be available nationally to some 10 million viewers. But not on Comcast. And not in Denver,” lamented the Denver Post.

Logo President Brian Graden said he was neither relieved nor surprised by the reaction.

“Leading up to the launch, everybody led with [the backlash] question, and we gave an honest answer, which was, ‘I don’t think that’s the case,'” Mr. Graden said. “We have had on MTV, for example, gay characters and gay people routinely for 10 years to zero fanfare.”

What did surprise Mr. Graden is that viewers and critics have embraced the network’s scattershot format. Logo programming swings from older-skewing movies (“A Chorus Line,” “Henry and June”), to younger-skewing series (the struggling-screenwriter drama “Noah’s Arc,” the workplace reality series “Open Bar”) to everything in between-travelogues, talk shows, stand-up comedy and even nature documentaries, such as “Out in Nature: Homosexual Behaviour in the Animal Kingdom.”

Unlike most of MTV Network’s relentlessly branded other networks, the unifying theme isn’t a demographic or region or style of programming, but a type of programming that might appeal to a certain kind of person-in this case, gay. Mr. Graden said the decision to broadly program the channel stems from his concern about alienating factions of the very audience he was trying to target.

“On the one hand, it makes for a sometimes disjointed experience because you may go [from] a documentary on a 70-year-old lesbian couple into ‘Noah’s Arc,’ a scripted show about four African American men,” Mr. Graden said. “My biggest fear was putting on a channel that gay people would check out and say, ‘OK great. I just feel excluded one more time on the very channel that’s supposed to be my own.'”

The next step is for Logo to secure greater distribution. Logo will be in 20 million homes by the end of the year-half the digital cable universe within a few months since its debut.

One distribution consultant said certain operators are still skittish about Logo. “There hasn’t been a lot of backlash, but you’re still not going to find it in a lot of Bible Belt systems,” she said. “There is still a lot of resistance because it’s on digi-basic.”

The major operators that do not yet have a deal with Logo are Time Warner (beyond New York) and Cox, but both are due for MTV Networks contract negotiations within the next year, during which Viacom will presumably use its leverage to get Logo carried as part of its package.

Advertisers certainly haven’t been shy. The ad roster for Logo does not resemble a niche network. It includes Sony, General Motors, Subaru and Motorola.

“They might not get into the heartland, but I’ve watched Logo and they have very interesting programming that you don’t have an opportunity to see here,” said Shari Anne Brill, VP and director of programming for Carat North America. “And as a marketing force, there’s no denying [gays] have so much discretionary spending.”

Logo currently has nearly a dozen pilots in production, though the next firm go will be a documentary series, “The Ride,” which chronicles the annual AIDS/LifeCycle benefit bike ride.

“I’d really like to aspire to premium scripted fare. We want to continue to broaden the portfolio so that eventually the channel is totally reflective of the life you might lead as a gay person,” Mr. Graden said.

Logo at a Glance

Launch: June 30

Owner: Viacom

Top exec: Brian Graden, president

Main carriers: DirecTV, Comcast

Subscribers: 13 million

Subscribers in 2006 (projected): 24 million

Ad revenue per sub 2005: 9 cents

Ad revenue per sub 2006 (projected): 39 cents

Sources: Kagan Research and Logo