Patrick Gottsch peers out the window of his rented private jet as it surges above the tree line. "That's our audience," says the squat, worn-faced founder of rural cable channel RFD-TV, pointing down toward the farms jigsawed together along the Iowa-Nebraska border. What people don't understand, he later adds, is that every one of those squares will generate roughly $300,000 this year.
For nearly two decades, coastal financiers and TV honchos laughed at Gottsch for thinking he could make money by broadcasting shows aimed at America's heartland. They were wrong. Those squares he was pointing out? There are hundreds of thousands of them. Today, Gottsch's networks, based in Omaha, Nebraska, reach 40 million homes in more than 20 countries. RFD, the most successful cable network you've never heard of, boasts a weekly aggregate audience of 11 million and is available through every major cable carrier in the United States. Gottsch's success demonstrates that while global media seems to be consolidating, consumer tastes are more diverse than ever -- and cable TV, like the Web, offers rewards for those who can discover and exploit new niches in the marketplace.
A former farmer and Chicago Mercantile Exchange broker, Gottsch, 56, hawked satellite dishes door-to-door in the 1980s. Customers often griped about a lack of rural programming. Westerns like Gunsmoke had become a rarity, overtaken by shows about urban cops or suburban housewives.
Vowing to serve his neglected neighbors, Gottsch launched RFD in 1988. It went bankrupt after a year. He plotted a relaunch during the 1990s, but investors dismissed it as lacking financial upside. When RFD finally returned in 2000, it was a one-man public-service not-for-profit, broadcasting "stuff that was embarrassing to put on," Gottsch says, including cattle auctions.
Today, RFD's more diversified lineup includes shows in four categories: agriculture (This Week in AgriBusiness), equine (Training Mules and Donkeys), entertainment (Big Joe Polka Show), and rural lifestyle (Ms. Lucy's Cajun Classroom). RFD offers advertisers, including General Mills and Geico, access to two underserved groups: the roughly 27 million U.S. households outside cities and towns, and the lucrative over-50 demographic. In other words, people like Gottsch. The median household headed by someone aged 55 to 64 earns well over $50,000 per year, above the overall national median. A McKinsey & Co. study predicts that, by next year, people over 50 will account for more than half of U.S. consumer spending.
But a channel built around shows such as Hee Haw -- its reruns are RFD's top-rated program -- has still been a tough sell to cable giants headquartered in Philadelphia and New York. Conglomerates such as Viacom, owner of MTV and Nickelodeon, use their massive leverage to negotiate their new channels into clogged lineups. Tiny RFD, armed with only market research and letters from potential viewers, until recently relied almost wholly on viewers who owned Dish Network and DirecTV satellite dishes.
Since going for-profit in 2007 -- after the Federal Communications Commission ruled that airing cattle auctions no longer qualified as public-interest programming -- Gottsch has been on a quest to broaden his audience. He leased a studio in Nashville, Tennessee, to create original shows, and hired veteran TV execs, including Ed Frazier, ex-CEO of Liberty Sports. And RFD inked a contract to simulcast radio host Don Imus's show. That helped close national carriage deals with Comcast and Time Warner. This past summer, RFD signed an agreement with Cox Cable, the last of the majors that didn't carry its programming.
RFD remains about one-fifth the size of mature networks such as country-music-focused CMT. In August, when reports of Imus's move to the even smaller but higher-profile Fox Business first surfaced, RFD ended its simulcast of his show. ("Don has done the job that we brought him on to do -- give RFD exposure to East Coast major cable companies," Gottsch says.) RFD's ad and subscriber growth have also slowed amid the economic downturn. RFD "is not necessarily a bad small business," says Erica Gruen, ex-CEO of the Food Network. "It's not a robust idea for a television network."
Gottsch has heard that kind of thing for more than 20 years and is responding as he always has: by trying to prove the naysayers wrong. He's adding staff and launching new programs -- a variety show hosted by country legend Marty Stuart debuted last winter and is a hit -- and networks, including Britain-based Rural TV. Later this year, he also plans to make good on promises of a rural-news department with bureaus in Washington, D.C., and London.
Gottsch expects Rural Media's sales -- 25% each from cable subscribers, advertisers, programmers, and ancillary revenue (subscriptions to RFD: The Magazine; ticket sales at its Branson, Missouri, theater) -- to be near $25 million this year. He also expects a profit, in spite of spending on new ventures. As the media industry moves toward an on-demand model via Internet and cable, enthusiast-focused networks like RFD could have an advantage. "Their content is ripe for where the world is moving," says Boston Consulting Group managing director John S. Rose.
Gottsch now spends most of his 16-hour workdays plotting RFD's expansion and savoring his minor miracle of a network. "We had to eat so much baloney for eight years, being told what a foolish idea this was and how it'd never get launched," he says. You could call it a vision thing, and it is: Gottsch says he simply saw a huge opportunity -- one that he feels that other TV execs are still ignoring. "When they travel between New York and Los Angeles," he muses, "are they not looking out the window of the airplane?"