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Analysis: Will Pax TV find peace in Pittsburgh through cable or low-power?

Tuesday, February 15, 2000

By Rob Owen and Barbara Vancheri, Post-Gazette Staff Writers

When a three-way, $35 million Pittsburgh TV deal fell apart last month, it left Paxson Communications out in the cold. It's now asking the same question as WQED: Where does it go from here?

Channel 40 apparently is no longer an option, and since there are no other full-power stations available, Pax likely is looking at low-power stations, which don't have the reach of full-power stations, such as KDKA, WTAE or WPXI.

In Pittsburgh, they either offer specialized programming -- home shopping, in one case -- or a mixture of paid programming, reruns, movies, high school and college sporting events.

Low-powers WNEU (Channel 63) and WBGN (Channel 59) seem the most likely choices. WBGN is on more cable systems, but owner Ron Bruno said he's put in calls to Paxson and gotten no response. Pax TV does have a few low-power affiliates, mostly in smaller markets such as Chattanooga, Tenn., and Fargo, N.D.

Pax, which is owned in part by NBC, recently announced a plan that would give NBC affiliates the chance to sell advertising and operate local Pax TV stations.

Could Pax simply take the place of PCNC, the cable-only sister station of Pittsburgh's NBC affiliate?

WPXI general manager John Howell said he hasn't been approached about such a scenario, but he doesn't think it's likely.

"Having PCNC is pretty important to our long-term strategy of being the news station left standing," Howell said.

"We wouldn't be interested in doing that. But anything's possible. Nobody's come to me and said, 'Here, have a kagillion dollars, can we have PCNC?' "

Lowell "Bud" Paxson, chairman of Pax TV parent company Paxson Communications Corp., declined an interview request for this article.

In some markets -- including Baltimore, San Diego and Charlotte -- Pax bought its way onto cable systems. Unless Cornerstone decides to get back on board the WQEX swap, cable may be Pax TV's best way to enter the Pittsburgh market.

Tracy Hollingsworth, a spokeswoman at AT&T's Cable's corporate headquarters in Denver, said Paxson has an arrangement with AT&T to buy its way onto cable.

"They have an agreement with us that if they don't have a broadcast affiliate in a market, they can work with us to get on [cable]," she said.

"In the Pittsburgh market they have not approached us."

Hollingsworth wouldn't comment on specifics of the deal or its cost, but in other markets Paxson reportedly has paid between $3 and $10 per subscriber to get on cable. One source put the price of a permanent cable slot on local cable systems at $12 million.

Most likely Paxson wouldn't stop at AT&T, the dominant cable system. The broadcaster would also want to reach subscribers of Armstrong, Adelphia, Comcast and other area cable companies.

Could Pax TV live without Pittsburgh, if it had to?

Analyst Niraj Gupta from Schroder & Co. in New York says Pittsburgh is an "important market, although not critical to the execution of Paxson's broadcast strategy. It's a large market but it's not a New York or Boston or Chicago."

Without Pittsburgh, however, Paxson loses a potential 1.1 million TV homes.

"That's only 1 percent of the nation, but in the top 40 markets, where two-thirds of the ad dollars are, it's a hole," says Bishop Cheen, a media entertainment analyst for First Union Securities in Charlotte, N.C.

"It's a hole that can be cobbled together via second-tier, UHF stations, low-power stations or exclusive cable-carriage agreements," he adds.

The No. 1 option is to have a separate station, such as Channel 40. That way, viewers without cable could still find Pax programming.

So, how much money is Paxson losing by not being in Pittsburgh?

It's impossible to know, but perhaps $8 million in TV advertising next year and $15 million down the road.

That's if Paxson shoots for 3 percent -- and then 5 percent -- of the Pittsburgh TV advertising market, expected to reach $270 million next year and, eventually, $300 million.

Switching from ad dollars to audiences, Cheen says viewers just want as many choices as possible.

"The consumer could care less if it comes from cable, over the air or through the bathroom window."

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