NEW .2 NETWORK LINES UP FIRST AFFILS

TVNEWSDAY, Apr. 15, 9:04 AM ET

The fledgling diginet from Guardian Enterprise Group signs charter affiliates from Post-Newsweek, Belo and Meredith for its lineup of classic TV shows, lifestyle and FCC-friendly kids shows and paid programming anchored by three, two-hour movies a day. It’s also encouraging stations to preempt two hours a day for news and other local programming.
By Harry A. Jessell

The upstart .2 Network has taken its first big strides toward becoming a viable digital network, landing stations belonging to three major TV groups—Post-Newsweek, Belo and Meredith—as charter digital affiliates.
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“These are some of the finest group television broadcasters in America and we are deeply honored to be affiliating and partnering with them,” said Richard Schilg, CEO of Guardian Enterprise Group, the parent of the movie-laden .2 Network that hopes to debut this summer or fall. “You can’t build a great network without great affiliates.”

The stations include Belo’s KHOU Houston (CBS, DMA 10); Post-Newsweek’s WDIV Detroit (NBC, DMA 11), KSAT San Antonio (ABC, DMA 37) and WKMG Orlando, Fla. (CBS, DMA 19).

Meredith has agreed to carry the network in Kansas City, Mo. (DMA 31), and Portland, Ore. (DMA 23), where it operates duopolies.

It owns KCTV-KSMO (CBS/MNT) in Kansas City and KPTV-KPDX (Fox/MNT) in Portland, Ore.

“It’s a clever idea,” says Post-Newsweek President Alan Frank, noting that .2 Network’s movies distinguish them from other networks vying for a place on broadcasters’ digital channels.

Susan McEldoon, president-general manager at KHOU, says that she was attracted by the turnkey nature of the network.

“And I have the opportunity to do some daily preemption if I want to repurpose some of our own local shows there,” she says. “And there’s a revenue share on the paid programming component that I thought was interesting.”

Schilg says that the network has a smattering of other affiliates in small markets—Roanoke, Va.; Lafayette and Alexandria, both Louisiana; Alpena and Marquette, both Michigan; and Glendive, Mont.

All told, the network now covers just about 8 percent of U.S. TV households.

But, Schilg says, negotiations with other stations and station groups should soon yield another 12 percent of coverage and bring the total to 20 percent.

The .2 Network is not the only so-called diginet aggressively seeking broadcast affiliates.

In addition to some stations' or groups' home-grown digital services, .2 Network is competing against Retro Television Network, LATV, World Championship Sports Network and Mexicanal.

Retro Television Network, with its lineup of “classic” TV shows, is operated by Equity Media, a TV group based in Little Rock, Ark., and has done the best job in recruiting affiliates so far.

Its lineup of stations belonging to Cox, Allbritton, Barrington, Capitol, Media General, Scripps and others now covers 40 percent of TV homes.

All these new networks must also compete with other uses of the digital spectrum.

Some broadcasters, for instance, are reserving it for in-band mobile TV broadcasting, a service they feel has more potential than conventional networks.

The 24/7 .2 Network plans to launch sometime between July and October with East and West Coast feeds as soon as its reaches 30 percent coverage.

The network is not doing affiliate deals on a first-come, first-served basis, Schilg says. It is looking for group deals that will give it the strongest station in each market, he says.

The network’s goals are to have 40 percent coverage by the end of this year, 50 percent by the end of 2009, 60 percent by the end of 2010 and more than 90 percent by the end of 2012.

Schilg cautioned that the coverage total reflected the over-the-air footprint of the stations and the actual coverage would be something less since the network will not be on either of the big satellite TV operators and some local cable companies.

The network’s daily programming lineup is built upon three two-hour movies—at noon, 4 p.m. and 8 p.m.

According to Schilg, the theatrical movies are of recent vintage, many released within the past 10 years.

Schilg says the network has licensing deals with Sony and MGM and is negotiating with NBCU and Disney.

The 300 Sony titles include The Pink Panther, Stuart Little 3, Marie Antoinette, All The King’s Men, RV, Stranger Than Fiction, Seraphim Falls, Gridiron Gang, Reign Over Me, Monster House, Surf’s Up, Second Chance and Premonition.

Classic TV shows and lifestyle programming fills the time between the movies while paid programming fills the mornings.

The network is also promising to supply the requisite three hours of FCC-friendly children’s educational programming.

The network is encouraging affiliates to preempt two hours each day for news and other local programming. Affiliates may take back another two hours, but would have to carry the network advertising during those hours.

“The preference is for localization,” Schilg says.

The network is splitting commercial time with affiliates, keeping 10 of the 14 minutes each hour, but it also gives affiliates a large share of the national paid advertising revenue—30 percent the first year, 40 percent the second and 50 percent each year thereafter.

Schilg says the network is willing to share the paid advertising revenue so that affiliates can immediately begin enjoying some revenue from the network.

The network has been incubating for four years in an altered form—as the Guardian Television Network on Sky Angel, a package of religious and family-oriented programming that migrated from satellite to an IPTV platform earlier this year.

As Schilg describes it, GTN is .2 Network without the movies.

Once the network reaches 30 percent coverage and is ready to begin life as a broadcast network this summer or fall, GTN will change its name and begin airing the movies.

At that point, Schilg says, the paid programming revenue should be great enough to “validate the costs,” primarily the movie licensing fees.

The delayed launch makes good financial sense, he says. “We don’t want to begin the overhead without good offsetting revenues from having a good portion of the country,” he says. “We'd rather do the hard work of building the net without the combined work of operating it.”

Guardian Enterprises Group is a diverse privately held $50-million-a-year company based in Columbus, Ohio.

In addition to GTN/.2 Network, it owns a full-power TV station in Columbus, Ion affiliate WSFJ; a TV production company, Guardian Studios; a human resources services company, Guardian Human Resources; and an insurance company.

WSFL may not become an affiliate of .2, Schilg says. The network is considering a deal with another station group that would include the Columbus market, he says.

According to Schilg, Guardian Studios is best known for Bananas, a stand-up comedy series promising “good clean fun for the whole family.”

Schilg says Sony Pictures Television in syndicating the series for the fall of 2008 and EMI in handling DVD sales, which have already reached 300,000 units.

.2 Network has slipped Bananas into its “launch gird” schedule after the primetime movie.

The network will launch as a standard-definition service, but, according to Schilg, will “shift very quickly” to high-definition because the movies are HD.

Despite some industry skepticism, the .2 Network engineers believe that affiliates can broadcast two HD signals within their one digital channel, their primarily signal at 1080I or 720P and .2 at 720P.

But even if a .2 affiliate decides not to broadcast the network in HD, it can offer it to cable systems in HD, which Schilg believes should help secure cable carriage arrangements.

The key to the financial success of the network is cutting good deals on the movie packages and operating efficiently, Schilg says.

“We know how to make the buffalo squeal on a nickel,” he says.

“People in New York and L.A. would sit around and think what we are doing would cost a fortune and it would in New York or L.A., but not in Columbus, Ohio.”

Schilg says he believes that network can quickly reach profitability. It all depends on those affiliate goals.

If it can get 40 percent coverage by the end of this year and 50 percent by the end of 2009, it will become “cash flow positive” sometime in 2009, Schilg says.

The network will rely on paid programming in the early going, but hopes to attract regular spot advertisers as soon as it gains traction with viewers and qualifies for Nielsen measurement.

“Our spots are going to be very valuable, very quickly,” Schilg predicts. “But it’s going to take a while for any secondary network to provide some national numbers.”

Schilg says he is in the market for an executive to handle national advertising and he or she would probably retain a national rep firm.
“Once people figure it all out, they will be very glad they grabbed up our network,” says Schilg. “It will give them a strong position against competitors in their market.”