Multicast Is Maturing And Studios Are Taking Notice

As cord-cutting increases across the U.S., broadcasters are there to catch pay TV defectors with free over-the-air multicast networks, also known as diginets.

Since the broadcast television completed the transition to digital in 2009, broadcasters have had several extra channels of spectrum with which to play, and many of them have turned that spectrum into nice little side hustles. In 2022, a non-presidential election year, local TV over-the-air advertising revenue totaled $20.5 billion, according to Pew Research Center analysis of Media Access Pro and BIA Advisory Services data. Digital advertising revenue, including multicast and free ad-supported television (FAST) channels, totaled $2 billion or 10% of total ad revenue. Some $1.2 billion of that is derived from multicast networks, a business that has grown tenfold in the 15 or so years that it has existed, says Jonathan Katz, president-CEO of Free TV Networks.

Nearly 19% of the U.S.’s 125 million TV households receive free television over the air, either via an OTA-enabled television set or digital antenna, according to Nielsen. The main goal of multicast networks is to serve those 23 or so million households with quality free over-the-air programming so that they can have an at-home entertainment experience at a far lower cost than pay TV.

“We create top-tier digital broadcast networks at the best possible price point, which is free,” says Katz, who oversees Free TV Networks, a joint venture between Warner Bros. Discovery, Lionsgate and Gray Television. Free TV Networks also is partnering with A+E Networks to launch diginet Dare, comprising A+E’s unscripted series, this summer. Katz is one of the earliest entrepreneurs in this space, having created such networks as Bounce, Laff and Grit, which were sold to E.W. Scripps in 2017 for $302 million.

“Free is the biggest total addressable market, free is frictionless,” Katz says. “We collectively solve a problem for differentiated, underserved, price-sensitive consumers … [who are seeking] compelling entertainment that’s also affordable. Everything we do is driven by the consumer. We don’t think of ourselves as being in the TV-network business; we’re in the business of saving people money.”

Over the past five years or so, the diginet game has changed, with the bigger diginets taking up more bandwidth across the country in a bid to garner national reach, says Peter Lietzinger, research analyst at S&P Global. Larger multicast networks — such as Weigel’s MeTV, NBCU’s Cozi TV, Nexstar’s Antenna TV and Scripps’ Bounce — have evolved into standalone networks with their own brand identities and content propositions.

“In many ways, these multicast networks are really what cable was early on,” says Adam Ware, SVP, growth networks group, Sinclair Broadcast Group.

One of the challenges of the digital multicast network business is measurement. Accurate measurement of OTA-only TV viewing is difficult to capture and cannot be broken down into reliable demographics, making it hard to target specific audience segments. Diginets need pay-TV carriage to gain enough reach to warrant paying for Nielsen coverage, which is required in order to sell to general-market advertisers.

“Paying for Nielsen is too expensive for a diginet unless you are going to go general market,” says Laura Florence, senior vice president, global FAST channels, Fremantle. Fremantle offers Buzzr, a multicast network comprising Fremantle’s classic game shows. “Nielsen costs are too high; that’s diginets’ No. 1 problem.”

Until they can reach that magical national-reach number, diginets mostly operate in the direct-response space, which are advertisements that include specific calls-to-action, such as a 1-800 number to call or a QR code to scan.

Multicast networks are looking to expand their content offerings from nostalgia library plays to original series, live sports, specials and other programming. Once considered to be mostly dumping grounds for studios’ unused library content, they are maturing into networks with their own brand identities and curated program offerings.

“Multicast networks need to not just call themselves television networks but be television networks,” Ware says. “Making channels is not easy. It’s not just library amortization. Those that are actually in the channel business branding, making sure their promotions matters, updating their graphics packages – all of those things are important. I tend to bet on the ones who have a history of making channels,” Ware says.

Sinclair is working hard to build its multicast networks into large reach vehicles. In January, the company announced distribution agreements with CBS to put Charge!, Comet, The Nest and TBD. on CBS-owned stations in the top-10 U.S. markets, including New York, Los Angeles, Chicago, Philadelphia, San Francisco and Miami.

In early April, the company announced a deal in which it is paying Disney to carry action-themed Charge! on its eight ABC O&Os. That move should make Charge! available in nearly 8 million new OTA and pay TV households.

Ware says putting Sinclair’s multicast networks on Big Four owned and affiliated stations is part of a strategy to get them into audiences’ channel-surfing patterns. For example, during the 2024 Super Bowl, which aired on CBS, Sinclair’s Comet programming team planned to run old movies to counter-program the big game. Ware said no.

“In New York, ch. 2 is CBS, ch. 2.5 is Comet, ch. 4 is NBC. At some point, people will start surfing. If they come across us and find an old movie, that’s not good. Instead, we ran what we would typically run in primetime because these viewers will stop and watch,” Ware says.

As diginets have grown, they’ve become large enough to attract simultaneous windows of first-run syndicated programs, such as Disney’s Tamron Hall, Warner Bros.’ The Jennifer Hudson Show, Debmar-Mercury’s Sherri Shepherd and NBCU’s Karamo, all of which air on Bounce, Scripps’ multicast network programmed to serve a Black audience.

Bounce, which was founded in 2011, has become a strong alternative to Paramount Global’s BET — so much so that after talks to sell BET cratered last August, buyers began to circle Bounce. Bounce’s owner, E.W. Scripps, has hired a financial consultant to consider selling, E.W. Scripps President and CEO Adam Symson confirmed in April and mentioned last Friday during the company’s Q1 call with analysts. The appeal of Bounce is that it costs much less than BET to operate, while turning in a similar performance.

“Financial discipline is critical to the success of these networks,” Katz says.

Diginets also have become an additional platform for syndicators looking to accrue a national audience. For the first time, syndicators have sold a first-cycle off-broadcast-network sitcom, ABC’s The Conners, to a multicast network — Scripps’ Laff.

“We just keep upgrading the content and looking for opportunities,” says Tom Zappala, head of programming, E.W. Scripps networks, which include Ion, Bounce, Laff, Grit, Court TV, Ion Mystery, Defy TV and Scripps News.

In the not-so-distant past, top-rated off-network sitcoms were the most lucrative programming that studios sold to TV stations, with shows like Warner Bros.’ Friends and The Big Bang Theory and Sony’s Seinfeld raking in billions of dollars. As a result of today’s fragmented marketplace, stations no longer can pony up that kind of cash.

“The Conners is the No. 1 scripted show on ABC and yet stations still aren’t willing to pay cash for it,” says Ira Bernstein, co-president of Lionsgate-owned Debmar-Mercury, which sold The Conners into syndication for Tom Werner’s Werner Entertainment. “In the past, bringing that show to market would have meant an instant bidding war.”

Program sellers such as Debmar are having to aggregate audiences across platforms to secure the same reach. The Conners, which will wrap its run on ABC with a shortened seventh season this fall, will ultimately air across six other platforms: It debuted on Nexstar’s The CW in early January and it has been sold to broadcast stations, including some owned by Nexstar, in markets covering 85% of the country. It also will have SVOD, AVOD and FAST plays as well as on diginet Laff.

“Diginets are a complement to broadcast. For us as sellers, they are just an interesting component to the overall deal. The sale of a show to a diginet is additive, and we are in an age where every little bit helps, and therefore, it’s important,” Bernstein says.

Sean Compton, Nexstar’s president of programming, says The Conners’ sale is illustrative of a trend he expects to continue.

“I definitely think you will see more first-cycle off-network sitcoms come to diginets,” says Compton, who oversees Nexstar’s diginets, Antenna TV and Rewind TV, which offer classic sitcoms. “There are fewer buyers on the station side to give them the mass clearance that they need.”

The diginet landscape is ever-changing. Networks are constantly being bought and sold, some fold or get rebranded, while new ones spring up. In early May, Weigel announced a new diginet, MeTV Toons, a partnership with Warner Bros. Discovery and other animation producers, which will run classic cartoons such as Looney Tunes, Scooby Doo, Casper the Friendly Ghost and many more. MeTV Toons is slated to launch this summer. Warner Bros. Discovery also is partnering with Katz and Free TV Networks to create new diginets using WBD content.

“We’ve been licensing our content in this space for a while, but we recently started to get serious about the business opportunity of diginets. The two we landed on are the ones with Jonathan and the one with Weigel. Both are experts in the field, and we had a body of content that was being under-leveraged, under-licensed and under-viewed. This was our chance at redeploying our content in a way that we felt would get premium eyeballs that we could monetize,” says David Decker, president of content sales, Warner Bros. Discovery.

Decker also agrees with Bernstein and Compton that more first-cycle off-network sitcoms will go to diginets in multiplatform deals. Warner Bros. Discovery is currently in the market with off-CBS sitcom Bob Hearts Abishola, which is premiering in broadcast syndication this fall. That show is expected to have an exclusive diginet window.

Looking ahead, new broadcast transmission standard ATSC 3.0 — also known as NextGen TV — will give broadcasters the ability to launch even more multicast networks.

“ATSC 3.0 allows for more channels on every station in every market. Multicast networks are an easy way to quickly use NextGen TV’s bandwidth,” Lietzinger says.

“I think the transition to NextGen TV will be really interesting. It will add targetability and the ability to use first-party data — it will change many things, including ad sales,” says Meredith McGinn, EVP, diginets and original production, NBCUniversal Local, which currently houses three diginets: nostalgia net Cozi TV, Spanish-language TeleXitos and NBC LX Home. “We’re looking forward to increasing engagement and offering viewers a more robust experience.”