Paula Deen's Comeback: Can Her Digital Network Succeed?

 

This story first appeared in the June 27 issue of The Hollywood Reporter magazine.

Paula Deen's planned comeback will be a key test of how celebrity brands can transition online. After losing her Food Network job last year when she admitted to using racial slurs decades earlier, the chef said June 11 that she's creating a digital network backed by $100 million from Najafi Cos., a private-equity firm specializing in industries that are going through technological transformation.

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While that criterion certainly applies to television, experts are mixed on whether The Paula Deen Network will succeed after its September launch. Those who say yes point to former Fox News host Glenn Beck's 3-year-old TheBlaze TV, which boasts 300,000 subscribers who pay $9.95 a month and accounts for more than 45 percent of revenue generated by parent Mercury Radio Arts. On the flip side is the WWE Network, whose high costs have analysts predicting heavy losses despite about 700,000 subscribers paying $9.99 monthly since its February debut.

Paula Deen Ventures CEO Steven Nanula says Deen had "a number of offers" to return to traditional TV but went the digital route in part to maintain "full creative control over the shows, recipes and dishes."

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Deen, 67, boasts the strong brand name and marketing platform needed to pull off a digital network — she has 4.25 million "likes" on her Facebook page and 1.25 million Twitter followers, more than she had before last year's controversy.

"Consumers are willing to pay for content," says Grand View University media professor Stephen Winzenburg. Less optimistic is Northlake Capital Management analyst Steven Birenberg, who notes that ad rates are much lower online than on television and that digital networks do not benefit from cable TV bundles: "You got your broadband bill, then you add a bunch of [online] nets and guess what? You are paying over $100 again and have given up a lot of choice and quality programming."

Nanula says the subscription model (he won't reveal what it will cost each month) means the network won't be dependent on ads. That said, Deen is expected to work her partners' products into shows, and she's open to creating sponsored programming.

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"I'm not a huge bull on this business model," says SNL Kagan's Derek Baine. "Most digital networks will be started because they can't get carriage deals on linear TV."

But Winzenburg says if Deen finds success, other top personalities will follow. Potential TV stars that could transition online include Jay Leno (whose Jay's Garage site performed well for NBC), Martha Stewart and Rosie O'Donnell. And once a digital network succeeds, it can transition to traditional TV, as TheBlaze has done through Dish Network and other distributors. "Online television's rise is inevitable," says Newsmax Media CEO Christopher Ruddy, whose digital network also crossed over, to DirecTV and Dish. "Critical mass is not yet there for advertising, but it will be."

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