A Commercial Venture
Preempting Shania Twain
For a variety of reasons, not the least of which was a number of country fans leaving irate messages on AMN's request line inquiring as to why their beloved Shania Twain video had been cut off in mid-seduction, AMN was moved to channel 15 and given a couple of extra hours a night of air time. Then, in August 1996, as part of the new cable franchise agreement, the channel went 24 hours. Of course the City Council didn't increase the channel's budget accordingly; in fact, it didn't increase the budget at all, so AMN limped along, overachieving and underfunded.
A year later, the channel was in danger of going dark as City Finance Department head Betty Dunkerly nixed the network from the upcoming city budget. Only a loud local outcry saved the channel, and even then, money was only allocated for half a year's operation. Ultimately, the city issued a request for proposal (RFP) for the management and operation of the Network.
Rick Melchior, then, a local video producer with the 501 Group, was given control of AMN at the September 3 Austin City Council meeting, when the governing body voted 6 to 1 in favor of his proposal to manage the channel. Melchior's interest in the AMN dates back to the spring of 1997. Prompted by the Chronicle's cover story detailing management problems at the channel [Vol 16, No. 25], Melchior contacted AMN project manager Ester Matthews in hopes of helping out in some capacity.
Shortly thereafter, Melchior did some digging and discovered that the channel's cable franchise agreement with Time Warner did not prohibit the network being run as a commercial venture. Melchior then began talking with city staff about the possibility of running AMN as a for-profit entity. That was, by Melchior's recollection, days before Dunkerly threatened to pull the plug altogether.
And Behind Door Number Three
So, what will be different about AMN under Melchior's aegis? From a viewer standpoint there will be two notable changes in the format of the network. First, Melchior intends to use hosts -- vee-jays -- to do live, on-air commentary and introduce video clips (think MTV before the Real World marathon). Current plans call for 15 1/2 hours a day of live vee-jaying. Second, in between video clips and banter from Austin's own Martha Quinns and Kennedys there will be those things they stick between touchdowns and kick-offs on network football: commercials.
Yep, Melchior plans to have the channel completely off the public dole in three years' time by selling ad and sponsorship spots, just like any other commercial cable or network channel. It was this point, whether or not to allow the network to go commercial, that was the single biggest issue dividing the ground over which proponents of AMN fought.
And it was ground that was occasionally defended very poorly: For instance, at the September 3 council meeting, Melchior responded to one in a series of cupcake questions from Councilmember Spelman with, "I would point out that not everybody finds commercials annoying. Some people think they are informative." The line drew laughs from almost everybody in attendance.
Through commercials, then, Melchior intends to raise $780,000 annually to support AMN. In order to reach that revenue goal, the network will run what Melchior estimates as an average of three spots per hour, each one costing about $50. Melchior already doesn't expect AMN to hit the $780,000 target for the first 12 months as he will be getting a much later start than anticipated (Melchior originally thought he'd be up and running by August or September), but even so, he expects that number "to hold up on a year to year basis." Nonetheless, whatever revenue is raised in year one, combined with the $500,000 first-year subsidy from the city, is a significant chunk of change when you realize that AMN had been subsisting heretofore on a yearly stipend of $287,000.
And Melchior is going to need every penny raised, because running the network in the manner he intends is simply going to cost more. First, he's going to have to pay for things AMN used to get for free. Current on-air personalities Jenn Garrison, Darcie Fromholz, and Andy Langer have all given their time gratis. All expect to get paid if they work on the new, commercialized version of the channel. And remember, it's not just a couple of shows a week with a host like it has been; in the future it will be 15 1/2 hours a day of personalities. No matter who holds down the vee-jay slots, the total air time will jump from 4.5 hours a week unpaid to over 100 paid.
In addition to the on-air crew, the network's entire staff will be significantly larger when one accounts for an advertising sales staff, camera operators, and editors. The current AMN has a core staff of four people. Melchior plans on having 18 part-timers and interns. More people, bigger payroll; according to the city, current staff will be given jobs, if not at the new AMN, then somewhere.
Along with the vee-jays come several other large expenditures. Melchior plans on moving the facilities out of their current home in the basement of the city building on Second Street and into Gary Pickle's MPA studios on Seventh Street. Melchior has to pay Pickle for the use of those facilities. Multiple cameras, multiple playback machines, etc. will also push costs up as well. To upgrade the network to a level that might look attractive to advertisers is an expensive proposition.
Melchior, though, may have to pay two critical bills that the old network never did: those from BMI and ASCAP. Anywhere music is being played, BMI and ASCAP, which publish a large segment of the music industry's output, collect royalties for the play of songs on everything from radio to jukeboxes to restaurants and bars, passing a percentage of their fee along to artists in bi-annual payments.
According to Ronny Mack, one of the network's co-founders, AMN received letters from both BMI and ASCAP stating that they did not pursue claims against music on public/educational/government (PEG) channels. The reason BMI and ASCAP waived any claims to royalties before was because they learned there was no money there to go after. Now that the AMN will be generating revenue, that exemption will most likely cease to exist. Estimates to the fees a commercialized AMN might have to pay range anywhere from $100,000 to $200,000 a year. And if that comes to pass, so too will the network, as Melchior acknowledges.
"If, as some people have suggested, BMI/ASCAP charge a national kind of fee like they do MTV or another one of the national channels, then this deal is not going to work," he states.
Even without those fees, however, the deal is not all sewn up. Melchior agreed in front of council that his income projections for AMN -- the $780, 000 figure -- were "quite aggressive." Which may be an understatement. By Time Warner's estimation, that annual revenue projection would almost certainly put AMN in the Top 5 of all cable channels. So where is that kind of money going to come from? Well, if you're running a channel dedicated to local music, maybe you might think of turning to the local music community. Any money there? The answer is a resounding "maybe."
"When I heard that the station was going commercial, I was certainly not going, 'Good, there's another place we can spend our advertising money,'" says Mike Henry, co-owner of the Electric Lounge. "We scrape by on advertising with what we do. I don't have any more money to advertise, and the only way I would start trying to cut our little advertising pie into smaller slices is if the station came out and was just blowing the doors off the town, but I'm not optimistic."
Like Henry, other owner/bookers of live music in Austin echoed similar sentiments. Griff Luneburg at the Cactus Cafe, for instance, not only doesn't have any funds to spread around, he doesn't even have cable and has never set eyes on AMN. He does hold out the possibility of advertising for larger shows he books, though; shows like Ani DiFranco at the Bass Concert Hall and Alison Krauss at the UT Union Ballroom. Similarly, the folks at Stubb's admit to the same for larger touring shows that have money in the production budget especially for advertising. Unfortunately, those kinds of shows account for a small percentage of the total number of shows each venue does.
Continental Club honcho Steve Wertheimer thinks AMN a potentially viable outlet, but not necessarily for his club. "I tell you who else would be looking at that would be record companies," he says. "I could see where [our label] Continental Records might be interested."
Melchior, who has done his homework, is well aware of this general sentiment and is not banking on being heavily dependent on the local club community. Instead, he's going after national and large local businesses. When asked who he's approached, Melchior throws out the name McDonald's. "We are still talking to them," he says. "I'm pretty confident they're going to be in there." When pressed for other sponsors, Melchior simply replies, "I don't want to get into a list."
Certainly McDonald's and its ilk have the money to spend, but it's not just a question of having the money to spend. It's a question of wanting to spend it on AMN. Again, spots on AMN are going to run around $50. However, if you commit to a package where you're buying a certain number of spots, you can currently get time on MTV, VH1, and the Nashville Network (TNN), between 7pm and midnight for around $25 to $30 a throw. That's non-time specific, meaning you don't get to pick precisely when the ad runs, but AMN rates, as they now stand, look to be double what the major music networks are charging.
Why would you spend $50 for an ad spot on AMN when you could get a comparable one for about half the price on a network that's hitting similar demographics and most certainly has a much, much larger viewership? You wouldn't. Waterloo Records owner and the man behind Watermelon Records, John Kunz, intimates that advertising on the network is something he'd try out to gauge its effectiveness, but balks when hearing the price tag.
"That's way high for cable," he says simply.
Even with the format changes, the vee-jays, and the commercial spots, the network might not look substantially different for a while. Melchior doesn't have any new programming yet, so he will have to depend almost exclusively upon what's already in the AMN library. This is one of the great ironies. The very footage that Melchior spent a lot of time criticizing will be much of what he airs until new programming materializes. Rather than showing an entire Ian Moore concert that the old AMN regime had produced, Melchior might pull one song out and play it as a clip following, say, the new Fastball video. Essentially, though, it's the same stuff just served up differently.
And the look of the network is paramount from an advertising standpoint. If one of the knocks against the network and its ability to attract viewers is its lack of high-dollar, professional looking productions -- and it's going to be relying on the same video material at least for a short while -- how it would attract viewers and hence advertisers? The need to overcome this problem is amplified by the fact that Melchior won't be up and running until the beginning of November, maybe even later.
And timing is important here, because many businesses have their entire advertising budgets for the year allocated on January 1. In other words, the money they spend for the entire year is spent on the first day of the year. So, given that the new version of the network will be on the air until some time in November, Melchior and his sales staff have at best two months to start looking good and getting viewers. If AMN isn't sufficiently slick to attract the advertisers by the time the new year rolls around, there will be that many fewer dollars to chase and things get that much more difficult.
Willie's Manager, Line One
The news doesn't get much better for the commercial incarnation of AMN, as it may have even more hurdles to clear. There are also questions about how much of the existing library Melchior can use. According to Kent Benjamin, one of AMN's co-founders, there's a standard contract that artists sign before any filming takes place that grants AMN use of material on a nonprofit, non-commercial access channel. Now that the channel is no longer non-commercial, Benjamin, who wrote the contracts, claims, "[Melchior] has to re-negotiate those contracts. He has to contact the artists and ask them for use of their material."
Melchior, on the other hand, counters that he has to do no such thing.
"The only gray language in the release is, 'I understand that AMN will not use the recorded material for commercial gain,'" says Melchior, "which would indicate a profit. There is no profit. It's a nonprofit channel. Everything is turned back into the channel. The only difference is that we're getting money from the community, from advertisers, rather than from the taxpayers."
This is where everyone becomes Dave Kendall (not the former host of MTV's 120 Minutes, rather President Clinton's lawyer), splitting semantic hairs. The channel is still nonprofit, but by showing commercials, can it still be considered "non-commercial"? Does that constitute a commercial gain? Is a commercial gain necessarily a profit? Current city strategy seems to be sending out letters to all of the artists indicating the changes at the channel, then handing the contents library over to Melchior. Any action beyond that will most likely be incumbent upon the artist to take.
Most artists probably won't care. A struggling band, which numerically is almost all of them, is going to want to be seen and isn't likely to object if its video plays against a beer commercial. They'll be happy to have their clips or live footage or whatever played at all. But the big names, the Willie Nelsons and the Jerry Jeff Walkers, flat out don't allow people to make money with their music if they're not getting their cut. Good managers don't, anyway.
MTV-style videos won't be a problem. Record companies typically own videos outright. Even the videos currently in the AMN library are still technically the property of whichever labels produced them. Record companies, though, love it when that stuff gets played. That's promotion. But all of that Willie footage from the last Fourth of July Picnic? Willie and all of the other bands okayed that with the understanding that it was for use on a nonprofit, non-commercial channel, and somebody in the Nelson camp might raise an eyebrow if they see that stuff up against a McDonald's commercial. And the problem with losing such footage, should the AMN lose it, is that Willie Nelson has the power to really draw viewers.
Benjamin, for example, is already pulling some of his personal collection from the archives. That's material which includes things like old True Believers footage, which they ain't making anymore. With the potential loss of some of its best material and with no new programming of its own, where will the shows that are needed to make AMN look substantially different be coming from? Well, new, non-clip shows like concerts or other special events will come from whoever wants to produce them.
Video producers, local and otherwise, are free to finance their own productions and take them to the network. Those producers then get paid a license fee by Melchior's AMN for the right to broadcast that show. Melchior explains that the license fee is roughly based on what the potential ad revenue would be for that program based on the time period and the number of times it airs. The money is a licensing fee to the producers, whoever they are, and they have to come up with the rest of the financing to do the show. This means that anybody who wants to can produce programming for AMN. The producer's gamble is that he or she is going to put together a show of enough quality on his or her own dime that will attract viewers. Those viewers attract advertisers and they buy the ad spots. The network gets paid, and in turn gives a cut of that paycheck to the producer.
Are these programs going to materialize? Yes. There will be a line of young, local producers around the block eager for their first shot on televisions. Will they be able to produce the quality Melchior needs? Uhhh ... There's no way to know yet. Melchior had a parade of local video producers come speak on his behalf at council meetings, so the interest is there even among the professionals. But it will still be a sort of chicken-and-egg-y (Egge?) situation for a while. In order for there to be financial incentive for producers, they are going to want assurance that the ad dollars are going to be there. Of course, the ad dollars probably won't start pouring in until much better footage and programming starts making it on the air.
Incidentally, the city will also be an AMN producer since it's pumping $500,000 into the channel. "The city owns the programs they pay for 100%," says Melchior, "which will be most of the live presentation." And, if I understand it correctly, where (presentation) is the vee-jay segments, that means the city is buying a lot of air chatter (hey, it's free on channel 6).
The city has not only bought that oh-so valuable live presentation, it's also had to make some concessions in order to permit the airing of commercials on AMN. For starters, the city had to negotiate with Time Warner the terms and conditions under which that would be allowed. Those terms are spelled out in what's called a carriage agreement, and there are a few things of note in that agreement.
First, Time Warner reserves the right to move AMN from its current slot at channel 15. The cable company has said it has no plans to move the network, but the media giant does have plans to launch its own 24-hour news channel, and since lower-tier slots are more valuable than those higher up the dial, popular wisdom says the slot at 15 is a natural home for that channel. Time Warner has also said that if they do move the channel, they will only bump it up one tier. That might actually be good for AMN, as it would be closer to "competitors" like MTV and VH1, rather than being buried amongst the access channels.
Second, if the network goes off the air for two consecutive 24-hour periods or for four 24-hour periods in the course of the year, Time Warner can void the carriage agreement. There was initially rampant panic that this meant the city would lose the channel to Time Warner, but city attorney Ed Delabarre affirms that with the cancellation of the carriage agreement, the channel stays with the city and things just revert to the terms of the original franchise agreement with the cable company.
Third, Time Warner has agreed to install a fiber optic connection, the link needed for broadcasting live, from the current building on Second Street to the company's headquarters on North MoPac. Small problem: Remember that Melchior plans on going live, not from the current location downtown, but from the MPA studios. As of this writing, the city and Time Warner were negotiating to change that, and Melchior didn't seem to think it a major obstacle, which is slightly unusual because Time Warner has historically been adamant about not going into local businesses; it took Threadgill's over two years of wrangling just to get a similar fiberoptic connection installed so they could run a series of live shows from the restaurant over AMN. Of course, by the time the cable company capitulated, the folks involved had lost the funding to do the shows. And, funny enough, the carriage agreement gives Time Warner the right to remove the connection.
If, for some reason, getting the fiberoptic connection at MPA studios instead of, or in addition to, the one at Second Street does turn out to be an obstacle, that could be another deal breaker.
"We can't do this channel out of the basement," contends Melhior. "I don't want to do it like it has been done. Our plan and the presentation is everything in regards to making it self-sufficient. We give up on the presentation, then we're just going back to what it was before, and I'm not interested in doing that."
Lost in all of this is the fact that the network has quietly gotten better over the last year, since the time the city first threatened to pull the plug last summer. Despite the fact that it was woefully underfunded, AMN was actually starting to work as a public entity. Unfortunately, as AMN producer Ingrid Weigand notes, once the channel got a bad rap, they had a hard time ever recovering.
"Part of the problem is that once you have a reputation of being nothing but reruns, it's incredibly hard to get out of that," says Weigand. "It's the easiest thing to keep repeating the things that have already been said."
And Weigand is correct. A story that ran in the Chronicle several weeks ago (hitting the streets the same day the City Council granted management of the channel to Melchior) asked the rhetorical question in regards to the AMN: "Anyone up for watching the Austin Acoustic Music Festival, again?" The network has almost completely stopped running Austin Acoustic Music Festival footage.
Playing the Percentages
The look of the AMN will change, just how much and in what ways remains to be seen. But the new arrangement doesn't just change the look of the channel, it changes one of the fundamental purposes of the channel. Now that the station is accountable to its advertisers, will those emerging artists (read: bands you've never heard of) be able to draw and hold viewers? The old AMN could afford to show unknown local bands and give them a place to be seen and heard, even if it was only to a few dozen viewers at any given time. That's a luxury Melchior doesn't have. It was a promise he didn't want to make either.
At the September 3 Austin City Council meeting, Melchior flat-out refused to be held to any percentages, meaning mandatory numbers of how much programming content had to be local. He claims the primary reason for his reluctance to do so is because "then you're programming to numbers and not to viewers." His other reason is that such a requirement presents an overhead problem in the form of an employee whose sole job is monitoring what gets played. One current staffer laughs that off, noting that AMN's databases are set up to where it takes a couple of mouse clicks to get the percentages of what's Texas and what's not.
Of course without any Texas or Austin strings attached, if viewers aren't there, then Melchior has the wiggle room to go as national as necessary to try to draw them to watch. Melchior did assure the council, "We are really dedicated to keeping the local aspect," but what's the point of a local music channel that isn't required to broadcast local music? Will it become all Matchbox 20 all the time? No, but as a channel subject to an indifferent market, it could have less of a hand in helping local bands with little or no track record get the exposure they so desperately need.
The Austin Music Commission did set performance goals for the network, and they set the bar fairly high, asking that 80% of the video clips in a 24-hour period be from Texas artists or Texas industry, but Melchior is not bound by anything to meet that number.
Why, then, did the council hand over the keys? They wanted to be rid of it. This issue has been an annoyance for over a year, and now, even if it fails, they can say they tried. They tried it first as a public entity, now they're trying it as a quasi-commercial venture. But in so doing, the council is now subsidizing a small business, a media outlet which will now compete with others for ad dollars to the tune of $800,000.
Melchior defends his receiving the public money, noting, "A lot of businesses in this town get subsidies from the city. It's not unusual for the city to give incentives for new businesses to start. So I don't see anything out of line with that. And certainly, the other people in this business are big boys. They can take care of themselves. I doubt we are going to make a difference in anybody's revenue."
To some ways of thinking, however, the new management and the commerciality is a step up as the network has been freed from the whim of the council from year to year. As a result of the way AMN was originally put together, its money came out of the general fund, so, even though Time Warner put big dollars into the general fund, money wasn't earmarked specifically for the network. That meant that AMN was always under the threat of the annual budgetary ax. Of course now it's subject to the whim of the marketplace.
The best-case scenario is that AMN not only survives but thrives for years to come, with the only price paid being the minor annoyance of having to sit through a handful of commercials each hour. That's not bad when you consider that there are usually that many spots per break on most commercial TV (although that number may be disappointingly low for those people who actually find commercials "informative").
The nayest of the nay-sayers give AMN six months to survive as a commercial but nonprofit venture. To fold that rapidly the channel would have to spend money at roughly four times the rate it has been and not raise a single dollar through the sale of ads. Not very likely.
The six months timeframe notwithstanding, there may not be much middle ground between those possibilities. If the network doesn't draw advertisers, then it will be short in the bucks it needs to maintain its slick appearance. If that happens, AMN could easily devolve back into something similar to its current appearance. And if that happens, stay tuned, for as long as you can, anyway.