UPN Goes Digital In the Heartland

[Gregg Lengling]

John Consoli

JULY 14, 2003 -

UPN is aggressively pursuing a strategy to expand the network's distribution by entering into agreements with owners of Big Three affiliates to start up digital over-the-air stations in smaller markets where UPN currently has no outlet. The network has 10 digital affiliates, most of which have gone on the air within the past year, with another five in the works to be completed by September. The most recent deal was with Granite Broadcasting in May, to launch a digital station in the Duluth, Minn./Superior, Wis., market, where Granite also owns NBC affiliate KBJR-TV.

Although Federal Communications Commission guidelines prevent a station from creating a duopoly in small markets with fewer than eight broadcast voices, the rules exempt digital outlets. Since few TV homes own sets with digital reception capability, each one of these stations has sought carriage on local cable systems for added distribution. And for those cable subscribers who do not have digital set-top boxes, operators are also carrying the UPN signals on their basic lineups.

UPN has digital affiliates in Greenville-New Bern, N.C.; Tallahassee, Fla.; Amarillo and Odessa-Midland, Texas; Baton Rouge, La.; Rockford, Ill.; South Bend, Ind.; Columbus-Tupelo, Miss.; Salisbury, Md.; in addition to Duluth-Superior. The markets range in size from 87 to 154, representing some 2 million cumulative TV households, of which 1.4 million are cable homes. UPN currently reaches about 88 million homes through its primary affiliates.

Sandy Pastoor, senior vp, affiliate relations for UPN, acknowledged the network is just on the ground floor with its distribution expansion. "There are still a lot of voids to fill," said Pastoor. "Our goal is to eventually get a digital affiliate in every market where UPN does not already have a primary analog affiliate."

The digital affiliate model differs from the WB's 100+ Station Group. While both distribution arrangements call for the network's programming to be delivered via a cable channel, the WB 100+ Station Group is a partnership between the WB, a local TV station and the cable operator. The WB provides 24-hour programming; the affiliate and operator sell local advertising, splitting the revenue with the WB and the costs between themselves.

The UPN agreement creates a traditional affiliate relationship between UPN and the local station, in which UPN provides only prime-time programming, leaving the local station to program the remainder of the time, sell local ads and keep all the revenue.

The first UPN digital affiliate was started in Greenville-New Bern in 1999 by Lamco Communications, which also owns the ABC affiliate WCTI-TV there. But Lamco was an early adapter of digital technology and ahead of most station groups in the digital transition. Most of the others have gone up within the past year, and Pastoor said the network is currently in negotiations over digital station startups in about five other markets. Pastoor would not say with which companies she is negotiating, but other sources identified Young Broadcasting, which operates NBC affiliate KWQC-TV in Davenport, Iowa, and CBS affiliates in Lansing, Mich., and Sioux Falls, S.D., as well as Raycom Media, which operates seven CBS and NBC affiliates in 100-plus markets.

Marshall Noecker, president/CEO of Lamco, said significant startup equipment costs associated with the transition to multicasting in Greenville-New Bern prevented the company from getting into the black until last year. With the infrastructure paid for, profits should continue to grow, said Noecker. Helping grow the digital station was a cordial relationship with local cable operators Cox and Time Warner Cable, both of which placed the station on Channel 3 among the other analog networks, making it easier for viewers to find.

The UPN digital affiliate in Salisbury, Md., owned by Draper Communications, which also operates CBS affiliate WBOC-TV, is carried locally on channel 16 on the Comcast, Charter and Mediacom systems. "Since we have only been operating since February, it's a little early to tell about the revenue situation, but we are encouraged with the reception from the viewers and the ad community," said Rick Jordan, gm for WBOC and the UPN outlet.

One station executive, who spoke on condition of anonymity, believes the UPN digital affiliation agreement is a better model than the WB 100+ deals because local station owners can program the entire day -- better targeting the needs of local audiences outside of prime time -- and do not have to split the ad revenue with the network. "It's a more vibrant model for the local stations," the exec said. "If UPN can improve its prime-time programming a bit across more nights, it will make it even better."

Jed Petrick, president of the WB, defended the 100+ Station Group model, saying "it is the highest-rated cable station in every market that it is in. It is in more than 9 million homes, and the non-prime-time programming is as strong as any independent station can offer."

While Petrick said there are no plans to dismantle the 100+ Station Group model, he said the WB is also lining up digital affiliates. Like UPN, the WB entered into an early deal with Lamco in Tri-Cities, Tenn./Va., where Lamco also operates NBC affil WCYB-TV. The WB has since added two digital stations, in Little Rock, Ark., and Roanoke,Va., started by Grant Communications, which also operates Fox stations in those markets.

"It's a creative way to get distribution in a market where you cannot get a full power station up," Petrick added.

While UPN's digital stations outreach is helping line up more potential viewers, the network does face a potential disaster down the road if competing network Fox -- which owns eight UPN stations reaching close to 22 million TV homes -- refuses to renew its affiliations that expire at the end of next season. Fox filed a $100 million breach-of-contract lawsuit against UPN in March, although negotiations are continuing on affiliation renewals.