Sinclair Broadcast Group's billion-dollar bet on seven ABC affiliates and a regional news network in Washington, D.C., hinges on a plan to transform that network into a national enterprise.
Sinclair would use NewsChannel 8 to create a unique hybrid model for cable television news, blending national and international coverage with local news customized for each market.
But the channel's success is far from certain, broadcast experts say, and depends on many unknowns, including Sinclair's ability to persuade cable operators to carry the network and the appetite of viewers and advertisers for more news.
"It's tough getting a channel like that off the ground," said Michael Malone, deputy editor at the trade publication Broadcasting & Cable. "It will be interesting to watch. Launching a channel and actually having people watch it and have operators carry it are all different animals."
Sinclair, which announced plans last week to acquire NewsChannel 8, the ABC affiliate in D.C. and six other ABC stations from Allbritton Communications for nearly $1 billion, said it's well positioned to quickly launch the new venture.
As the nation's largest broadcaster, Sinclair would rely largely on existing resources — the national political news covered by the Washington ABC station and the local content generated by the TV news operations at 101 Sinclair stations in 71 markets.
"We believe there is significant value by coupling the cable channel with the rest of our news stations and rolling it out to more than just D.C.," Sinclair CEO David Smith said during a conference call with investors and analysts last week. "We can provide a unique customized local presence in our markets and the markets of other broadcasters" that could become partners.
The company's intentions seem clear, said Marci Ryvicker, senior analyst with Wells Fargo Securities.
"SBGI will syndicate the programming from Channel 8's current slate [national and international news and lifestyle programs] across its markets and infuse its market-by-market local broadcast news, creating the first hybrid national/local cable news channel," Ryvicker wrote in a report on Wednesday.
For Sinclair, among the most active players in the broadcast industry's consolidation, the strategy makes sense, Ryvicker and others said.
"Sinclair's been gobbling up lots and lots of TV stations," Malone said. "It's got these footholds all over the country now, so the idea of deploying a network with this great reach they have sounds like a logical next step."
Smith said the new channel could compete with well-known brands Fox News, MSNBC and CNN by incorporating what he envisions as a new twist, local news and other programs of local interest. He said he believes the expanded news channel could generate $300 million in additional revenue, based on the affiliate fee CNN charges cable carriers of 57 cents per subscriber per month.
Local news continues to be important to viewers, Smith said, and the audience ratings back that up, with ratings for programs on Sinclair's network affiliates typically outshining cable news.
"People really understand the relevance of local television [news] and the value it brings to the marketplace versus what cable news channels bring," he said.
The relationship between Sinclair's network affiliates in Baltimore and other cities and the cable channel could mirror the relationship between WJLA, Allbritton's ABC affiliate in Washington, and NewsChannel 8, said Douglas Gomery, a professor emeritus at the University of Maryland and broadcast economics expert.
The stations could share news teams and content, and cross-promote one another, Gomery said.
He believes Sinclair would develop local programming for the cable channel besides traditional newscasts, a program that focuses on local sports, for instance.
"What they have planned, I have no idea, but they didn't spend that much money to not have something planned," he said. "They have some idea of how to marry the two [channels] together that will make more money than simply repeats. They'll do what they think will make money."
Still, Sinclair has its work cut out for it, broadcast experts and analysts agreed.
The Sinclair channel launch would take place in a different era from the one that gave birth to CNN in 1980, Malone noted. Today's media consumers can be pulled in a hundred different directions, with cable and network TV channels, video games, social media and websites all vying for time and attention.
The challenge is "just getting people to tune in with so many choices," Malone said. "How do you get someone to sit and watch 30 minutes of a news channel if it's not a known brand?"
The most challenging aspect, though, may be securing distribution on cable networks, said Merrill Brown, a founder of MSNBC.com and director of the School of Communication and Media at Montclair State University in New Jersey.
"Cable channels want to be paid as opposed to paying" a subscriber fee, Brown said. "News channels are buying their way on. It's hard to believe [Sinclair] would be in a position to invest hundred of millions of dollars in buying carriage."
Malone agreed that "getting the carriers on board will be tough negotiations."
But Sinclair could find a way, Gomery said, especially if the cable channel is primarily local in focus. Federal Communication Commission rules stipulate that local stations must be carried by local cable companies, he explained.
The Allbritton acquisition, which requires FCC approval, is expected to close in the fourth quarter. It is Sinclair's fifth deal announced this year, putting the company on track for a total of $1.9 billion in acquisitions, adding 54 stations to its roster. Sinclair also said last week it is hunting for more properties.
Ryvicker, for one, believes the company's size and reach to more than 38 percent of the nation's households will allow it to move ahead with the cable channel plans. The broadcaster will own or operate 147 stations in 76 markets after all pending deals are finalized.
"While it might take time to engage in carriage discussions [with cable system operators such as Comcast] and collect fees, we would not underestimate SBGI's 'clout' with 38 percent coverage" of U.S. households with televisions, Ryvicker said in a report Wednesday.
Ryvicker said she did not expect the channel to be a significant investment of millions of dollars.
"It's hard to bet against Sinclair," Malone said. "They've very committed and they love the business. They said they would grow, and they did."