Now that Another Shoe has Dropped, What Will Happen with the New Networks?
February 28, 2006

Now that Another Shoe has Dropped, What Will Happen with the New Networks?

With the Fox announcement of My Network TV the once sedate television network world has been given a jolt once more. It seems like years ago that we were all living in the comfort of a seven network world. But now there has been subtraction by addition or is it addition by subtraction? Theres no more Pax, its the I. UPN and WB have jumped in together to become the CW. Now comes along My Network TV -- the Fox answer as to what to do when suddenly faced with the potential of owning independent stations in large markets. And, it is doubtful that anyone has missed the audible groan from the syndication community, who, just weeks ago couldnt believe its luck when it appeared that there would be hundreds of stations looking to fill primetime hours beginning this fall.

The Fox announcement certainly throws in the need for a softer edge in the hard line the CW network took in its opening negotiation stance. Suddenly, former WB and UPN affiliates have a new and potentially lucrative option available to them. At the same time, uncertainty reigns on whether the new programming approach announced by Fox will draw viewers. Will viewers really commit to a five night weekly series for multiple weeks? According to the Fox gathering last week, the Fox model, which stresses lower cost production series, will allow for quicker profitability at lower rating levels. Where it ends up and which network succeeds is still unclear, but these dramatic moves have certainly shaken up the network and local television markets just some ninety days prior to the 2006 upfront selling season.

By taking the best programs from the WB and UPN networks, the new CW network should come out of the gate stronger than My Network TV. With viewers more loyal to programming than any given network, those viewers loyal to former UPN/WB programs will find their way to the local CW network affiliate. Thus, the sales staffs of these affiliates will have a better known and potentially stronger lineup of programs in their portfolio to sell.

As a way of minimizing the launch of My Network TV, the network sales personnel at CW could be justified in positioning the new Fox offering as nothing more than reheated syndication offerings. Madison Avenue, in part, initially appears to concur with that assessment, although this may just be preemptive posturing and a first negotiating stance on the part of the agencies. Further aiding the CW is its superior distribution in the top three markets, where it has solidly owned and operated affiliates in the VHF band that have very strong local news operations.

The CWs confidence was evident in its letters to station groups last week, which asked for a considerable amount. CW initially offered potential affiliates the current network/affiliate advertising splits during network prime, asked for upgraded marketing commitments, and made requests for access to more dayparts outside of prime time including the lucrative early morning and late fringe time periods. And, adding insult to injury, also requested reverse compensation. These demands were obviously just the first offer by the CW, but the aggressiveness of these demands were surprising to many of the owners of these potential affiliates. CW originally believed, and probably still does to a slightly lesser extent now, that they were in a position to make those demands since they were taking the best programs from the previous two networks with a track record of performance and that station owners would be faced with little choice. From the CW perspective, in the new primetime marketplace, station owners would be confronted with paying for primetime products if they didnt take the CW offer. The rationale: would it be unreasonable to ask new affiliates to pay something for programming and development with a proven track record?

Now, making those demands with the presence of My Network TV is more precarious. It should not have come as a surprise to CW that Fox would respond with a competitive programming offer to the soon to be orphaned WB and UPN affiliates. Fox is a company with tremendous resources in a variety of programming genres: the more edgy cable news network; a growing roster of sports offerings; and, an enviable track record of successfully introducing new products. The myriad of doubters who laughed at Rupert Murdochs initial launch of the Fox Network back in the 80s probably still remember that they were forced to eat their words later. Fox has also proven to be a paradigm breaker in the launch of the Fox News Channel vs. the CNN franchise. And, in further substantiation of the Fox mystique; the good folks at NBCUniversal are already making changes to the make up of CNBC in anticipation of the pending launch of Foxs Business Channel.

Further, there is too much value in the Fox television stations presently affiliated with UPN for Fox to stomach the lower values held by true independents given a television landscape that doesnt seem to hold too much room for success for that business model. In todays more competitive video marketplace, it is clearly necessary for local television stations to somehow distinguish themselves and establish or maintain a brand name. Without the UPN brand name or something of substance as a replacement, these Fox owned stations were in jeopardy of losing enterprise value as well as a brand name. As an attempt to earn new distinction, it could be argued that the name My Network TV is an acknowledgement by Fox that television is on its way to being a medium where personal choice plays a larger role, particularly to the millenials who increasingly refuse to be served content at the time and place of someone elses choosing?

Consequently, the My Network TV concept was developed and introduced this past week, with initial discussions taking place with potential affiliates that provided a very different approach than the CWs original position. Affiliates were offered far more inventory to sell during prime time, no demands on other time slots, and no request for reverse compensation as well as a fifty-two week schedule of fresh programming. Indeed, one could call the added inventory offered to potential network partners a form of non-cash compensation, guided perhaps by the knowledge that My Network TV is an inherently riskier proposition. One of the programming concepts the new network presented involved a very different approach; English-language telenovelas that have been very successful for Hispanic television networks. Desire and Secrets are two Telenovelas that will air Monday through Friday as part of My Network TVs fall schedule along with a slate of other, mostly reality programming. Foxs strategy to debut this type of programming at the beginning of September 2006 will provide an opportunity to introduce something fresh and different, without the distraction of new programs being rolled out on the other networks. And, Fox gets the jump ahead of other networks getting ready to add Telenovelas in the future. While risky, taking a very different approach is consistent with the aggressive attitude taken by Fox in the past and is necessary in a video marketplace where consumers have hundreds of choices beyond what any of these networks have to offer.