Home Shopping Co-Founder to Start a Seventh Network

Lowell “Bud” Paxson, who made a name for himself as the co-founder of the Home Shopping Network, said Wednesday that he is trying to build a seventh national broadcast network that will target women with a slate of wholesome family programming.

Paxson said that by the end of August 1998, his more than 70 UHF television stations will shift their emphasis from infomercials to network reruns of such shows as CBS’ “Touched by an Angel” and “Dr Quinn: Medicine Woman.”

The news of the planned launch of Pax Net comes weeks after media mogul Barry Diller announced a similar plan to use his dozen UHF stations to create a national brand under the USA Network banner.

Paxson said he expects to reach 85% of the country by blending his broadcast reach with cable coverage. By contrast, Diller said he will use USA Network to extend the 70% reach of his local stations, each of which has distinct programming. Some of that will air simultaneously on USA Network, the widely distributed cable channel Diller recently agreed to purchase from Universal Studios.

Paxson is trying to capitalize on federal rules upheld by the Supreme Court in March that require cable operators to carry broadcast stations that overlap in their markets. Those rules allow second-rate UHF stations such as Paxson’s to vastly improve their penetration of a given area.

Although newer broadcast networks, such as WB and UPN, are nowhere near profitability, Paxson said Pax Net will break even within four months of its launch. That promise was met with skepticism on Wall Street, where shares of Paxson Communications Corp. dropped 75 cents Wednesday to close at $9.13 on the American Stock Exchange.

Analysts, though intrigued by Paxson’s concept, said they are leery of some of his assumptions. To pay CBS for the nearly $1-million-per-episode cost of “Touched by an Angel and for other programming, Paxson is relying on his ability to sell advertising time at a premium: He plans to charge local rather than national rates. Local advertising often brings double the national rates in prime time.

“Are we a network? Yes,” Paxson said at a news conference in New York on Wednesday morning, before boarding his private jet, emblazoned with the new Pax Net logo, to hold a similar briefing in Los Angeles. “But our economic model is the independent station.”

He said that while networks generally give affiliates only two or three minutes of advertising time an hour to sell locally, his stations will sell 60% of the inventory locally, as independent stations generally do.

To illustrate the profit potential of his venture, he noted that WB had a negative cash flow of $97 million last year but that its affiliates brought in a collective $881 million. Because he owns both the network and his affiliate base of 73 stations, Paxson said, Pax Net will turn a profit in its first year.

Analysts expect Paxson Communications to have an estimated cash flow of $29 million this year from infomercials . However, Paxson expects to increase that number to $170 million once Pax Net is up and running, mostly on the value of cumulative ratings from network reruns and original fare, which will include Christian programming.

Analysts said they doubt advertisers will pay Paxson big rates for fractional ratings, which is all he claims he will need to turn a profit.

“If NBC is ‘Must See TV,’ this is ‘Already Seen It TV,’ ” one industry source said. “Local advertisers aren’t going to pay big rates on the 0.6 rating he says he needs to break even.”