Back on October 25, 2010, Dave Flessner of The Times Free Press in Chattanooga, Tennessee, posted a very informative piece on how an entrepreneur is taking advantage of the move to digital signals by local television stations. I had one of those, “okay, I know this guy” moments as I read it. You’ve probably seen one of the new networks discussed in the piece, RTV. Now you’ll get a little insight on what makes the network tick and more importantly how a little ingenuity can go a long way to serve underserved markets.
Henry Luken is going retro with his newest business venture.
The 51-year-old Chattanooga businessman is banking on old-fashioned over-the-air broadcasting and classic TV shows to attract what he hopes will grow into millions of viewers and hundreds of millions of dollars for his new TV networks.
But the way Luken Communications is building the growing networks is far from old fashioned.
Luken, who made a fortune pioneering a low-cost, long-distance phone business in the 1980s, is applying his computer software and telecom genius to build and deliver an array of new television networks for both cable and over-the-air stations.
“Every time I try to do something the same way everybody else does, it’s a struggle,” said Luken, who has bought or built businesses in everything from boat building and real estate to telephone service and jewelry sales.
“When I find a new way to do something — either my way or finding a way someone else has come up with but not taken advantage of yet — that’s how you make money,” he said. “It’s just building a better mousetrap.”
Luken is convinced he can build a better mousetrap to deliver television programming at a fraction of the costs of other distribution outlets, be they broadcasters, cable operators or Internet-protocol video services.
From a non-descript, brick building that once housed the data processing operations of American National Bank in Chattanooga, Luken is developing up to 10 nationwide networks. In a former bank vault, the 50 employees of Luken Communications are transferring old videotapes and computer files of television shows and running 140 master controls for program distribution via satellite to TV stations nationwide.
“Programming is key and we have some of the best,” said Neal Ardman, a consultant for Luken Communications who previously headed operations at Equity Broadcasting Co. in Little Rock, Ark. “Henry is a genius when it comes to computer software and technology and he’s figured a way to deliver content in a much better way than other networks.”
Two years ago, Luken paid the then-bankrupt Equity Broadcasting $18.5 million to buy the Retro Television Network and its license of television shows from the 1970s and 1980s. The renamed RTV includes such shows as The Rockford Files, Adam-12, Dragnet and Magnum P.I. and has helped launch the first of many networks Luken is planning to deliver to new digital add-on and low-power stations nationwide.
Last year, Luken partnered with the Seals Entertainment Co. LLC to launch Tuff TV, which features a variety of male-oriented sports and adventure programs. In the next month, a children’s network, PBJ, is set to debut and Luken says he is actively working on partnerships for other movie channels and networks of old shows.
Each of the networks is distributed via satellite feeds to stations in an individualized format from a bank of computers and satellite uplinks from Luken’s 5-story building on 8th Street in downtown Chattanooga.
Luken divides the available commercial time — usually about five minutes every half hour — equally between the local station and the network. With each network, Luken will have time for 5,000 or more commercials a month.
Tom Tolar, general manager for WRCB-TV3 in Chattanooga, is among the TV broadcasters that lined up with Retro TV to program the additional channels available to broadcasters following their digital upgrades.
“It’s obviously in its infancy and we’re just beginning to understand the audience for this,” Tolar said of the Retro TV lineup on Channel 3.2 (Comcast Channel 216). “But I think there’s a tremendous opportunity and gives us another outlet to get viewers.”
Tolar said Luken himself has come to the station to adjust the satellite equipment and make sure the RTV signal is working.
“Henry is a very hands on guy, and the quality of the shows and the delivery from the network is superb so we feel good about it,” Tolar said.
Broadcast stations picked up extra stations when they converted from analog to digital formats in recent years. Depending upon the equipment used and the high-definition quality sought for the main station, up to five new digital add-on stations can be added for most TV stations.
WDEF-TV-12.2 added another one of Luken’s networks this month. Channel 12.2 (Comcast 212) is airing TUFF TV, which includes Motoworld, Unreliable Sources and first-run dramas like Black Dawn and Port City PD.
“We’ve had the capability for some while, but we were waiting for the most suitable programming channel,” WDEF General Manager Phil Cox said. “We think TUFF TV is a very good niche program for this market and our strategic plan is to build additional sports and outdoor programming opportunities around Tuff’s core network shows,”
With the same hometown, both WRCB and WDEF bill themselves as the flagship stations for Luken’s first new networks.
The RTV and TUFF TV networks don’t have Nielsen television ratings in most markets so it’s too soon to know the exact audience. But Luken expects to have a presence on several channels in every television market within the next few years, giving him access to a share of nearly $100 billion spent a year on television advertising in recent years.
“Even if that has shrunk to $70 billion in the current downturn and even if we get only a tiny share of that pie, there’s still a tremendous potential here,” Luken said.
Already, Luken networks are available in about 140 U.S. markets, reaching more than 80 million persons.
Unlike other national networks, Luken says he can localize ads from the original network feed.
“We have a tendency to build hardware and software solutions here ourselves,” Luken said. “We’re not doing much of anything the way industry is already run. We’re a bit of a rogue.”
Luken isn’t just content with providing the content for other stations. The Chattanooga entrepreneur is also eager to buy up low-power stations to add far more choices for the 22 percent of American households that don’t subscribe to cable or satellite TV services.
Luken recently paid $60,000 to buy one of the unused low-power TV stations in Chattanooga — WOOT-LP – Channel 6. He is also negotiating to acquire or partner with other broadcasters for more than 100 other low-power stations around the country.
By converting such stations to a digital format, each of the stations could broadcast four or five channels each.
“I’d like to have 400 low-power TV permits eventually,” Luken said.
With so many stations, Luken figures he can dramatically cut the digital conversion costs and help multiply the number of over-the-air TV outlets available to those without cable or satellite TV connections.
Most cable operators also are including the local stations in their lineup, Luken said.
“Our TV content is almost universally liked by consumers and the cable providers so we really don’t have a problem getting our stations on cable,” he said.
But with the sluggish economy, Luken said many American households may opt to rely entirely upon free over-the-air television, especially as the number of such channels proliferates and programming options expand.
The market research firm SNL Kagan, reported its first drop in the number of cable subscribers during the second quarter of 2010 with 711,000 fewer households hooked up to cable service.
“Although it is tempting to point to over-the-top video as a potential culprit, we believe economic factors such as low housing formation and a high unemployment rate contributed to subscriber declines in the second quarter,” SNL Kagan analyst Mariam Rondeli said in a statement.
Luken said his TV venture is already turning an operating profit, although he is a long way from paying back the investment in the programming and stations. But Luken sees a tremendous growth potential as he adds more networks and station affiliates and more viewers become familiar with the new options, either over the air or on cable.
“I think television is all about choice so as many choices as I can put up the more I can win. I like to win,” he says with a chuckle.