Advertising success - and a blizzard of legal battles

Within months of the ruling, Gottsch had created three corporations and a holding company for the various divisions of RFD. With no restrictions on advertising, business boomed. The holding company, Rural Media Group, saw revenues of more than $15 million in 2007.

This year has been Gottsch's most successful yet. He is projecting $25 million in revenue and expects to double that in 2009. The network made the leap from satellite to cable: Agreements with Comcast (CMCSA, Fortune 500) and Verizon's (VZ, Fortune 500) fiber-optic service have brought it to urban markets. RFD-TV is now available in more than 40 million households nationwide. According to Nielsen Media Research, 7.5 million households tune in at least once a week.

Gottsch is aggressively pursuing new advertisers, who pay from $1,000 to $2,500 for a single 30-second spot.

"You have a good combination of a definable audience that's difficult to reach, concentrated in an area that's efficient to buy," says Jeff Stevens, managing director of Petry International, a New York City ad firm that has sold RFD-TV spots to advertisers such as United Healthcare and Bose.

Despite all his success, Gottsch has been dogged by persistent legal battles with aggrieved business partners. Just before the FCC ruling, a former business associate named David Barton, vice president of MyOutdoorTV.com, sued RFD for $19,500 in unpaid commissions from a programming deal he says he facilitated. With Gottsch, "it's a one-man show," says Barton. "You either do it his way or you don't do it at all."

In March, a Tennessee court awarded Barton full damages after no one appeared to represent RFD at the hearing. Collecting on that judgment, however, has proved tricky. Barton's attorney, Tom Corts, was told that the nonprofit entity named in the judgment no longer held any assets.

"It's been a nightmare for a small amount of money," says Corts, who is considering pursuing Gottsch's for-profit entities. Gottsch calls the case a "nonissue," because his nonprofit has been mothballed and has no lawyer.

Barton wasn't the only former partner to run into a legal wall with RFD. The Tanbark Group, which produced a block of equestrian programming called HorseTV, sued RFD in a federal court in 2001 for trademark infringement, business disparagement, and tortious interference.

"Gottsch carries grudges for a long time," says Sally Lasater, Tanbark's former managing director. "He's spent years telling malicious half-truths about me." (As Gottsch points out, Lasater has told a few half-truths of her own; in 1998 she pleaded guilty to a charge of perjury after being acquitted of bankruptcy fraud and served several months in prison.)

To help prove its federal case, Tanbark subpoenaed e-mail records from America Online (like FSB, a division of Time Warner). The records showed that disparaging e-mails about Tanbark, sent to its business associates under a pseudonym, had come from Gottsch's e-mail account. In one hearing, Gottsch denied that he'd sent the e-mails and noted that his family members also had access to the account. "I made it clear to everyone in my family that this is my fight and stay out of it," he told the judge.

Says Dave Cornell, a former executive at USFR Media Group, which was a Tanbark investor at the time of the case: "That's the kind of petty, wacky behavior that left me disenchanted with him as an individual."

Lasater also claims that during her business relationship with Gottsch, she received at least two e-mails from him asking her to call in to one of RFD's talk shows masquerading as a viewer. "The message will be relayed to Charlie [Ergen, founder of EchoStar] that we had 'hundreds' of people trying to get on to talk about RFD-TV," read a 2001 e-mail, seemingly from Gottsch.

Lasater's suit against Gottsch went to mediation, and the parties reached a settlement. But getting Gottsch to honor the terms was not an easy task. A judge eventually ordered RFD to pay more than $10,000 for violating the settlement. However, as in Barton's case, pinning down RFD's assets proved difficult. Eventually, Cornell says, the Tanbark Group gave up trying. "Nothing's ever been paid," says Gottsch, who denies Lasater's allegations and declines to comment further on the matter.

Even Gottsch's critics can't deny his achievements. "Establishing a television network centered on rural America was a wonderful thing," says Lasater. "He filled a void. But that doesn't distract from how he accomplished it. Do the ends justify the means?"

Today RFD-TV broadcasts 13 hours of original programming a day, including a simulcast of Don Imus's radio show, which airs every weekday. The other 11 hours of its schedule are filled with repeats. Only 5% of that original programming comes from RFD itself (22%, if you count Imus). Gottsch aims to change that with a $10 million flagship show, Rural Evening News. It is set to launch in 2009.

RFD's Nashville production studios are a hive of activity. Gottsch leases space in a facility owned by Pat Robertson. (He is not the first televangelist Gottsch has done business with; Gottsch says that scandal-plagued TV minister Robert Tilton once sold him a $75,000 studio set for just $1,000.) All 50 RFD employees are expected to show the work ethic of a farm hand.

"In one day I'll do a voice-over, run the teleprompter, write program descriptions for the magazine, and do Patrick's makeup," says Becky Hirsch, RFD's special-projects manager.

Gottsch aims to sign more urban distribution deals and add an extra ten million households to RFD's viewership. That would get his upstart network to the magical figure of 50 million households, or nearly half the country. At that milestone, says Petry International's Stevens, RFD would attract significantly more national advertisers. That may be tougher than it sounds. Cable markets in most cities have reached the saturation point, according to many analysts. Few viewers are looking for more channels.

Still, it wouldn't be the first time that Gottsch has defied expectations.

"He doesn't know what he can't do," says RFD's chief operating officer, Ed Frazier, the former CEO of Liberty Sports Channel. "That allows him to charge into places people wouldn't normally go."  

1 2