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Cable vs. broadcast isn't a fair fight

November 2, 2009 | 10:23 am

CLOSER

In a mostly positive piece on the Time Warner-owned cable channel TNT in today's New York Times, Steve Koonin, president of Turner Entertainment Networks, said he views cable vs. broadcast as "David, as an industry, toppling Goliath."

Not to take anything away from Koonin, a smart and witty executive who has put some good shows on TBS and TNT (the latter of which is picking up the cop drama "Southland" after NBC dropped it) and revitalized TBS, but cable already is Goliath.

Let's look at the facts. Broadcast networks have one primary revenue stream -- advertising. A cable network has a dual revenue stream of advertising and subscriber fees. While advertising revenue depends on lots of factors, including how well a network is doing in the ratings and the economy, the subscriber fees that distributors pay only go in one direction: up. TNT currently gets almost $1 per-subscriber, per-month from cable and satellite operators, according to SNL Kagan, an industry consulting firm. TNT is in over 90 million homes. That translates to a lot of gravy.

KOONIN Now let's look at the expenses. TNT currently produces seven hours of original programming, including "The Closer" and usually orders 13 episodes per show. CBS, NBC and ABC produce more than twice that much (yes, we're counting Jay Leno too, it is a new show every night), and Fox produces about another 15 hours. The CW produces close to 10 hours a week. All order at least 13 episodes, and the goal is generally to have 22 or 24 episodes.By the way, we're only talking prime time programming here, those costs go way up when you throw in news and daytime and late night.

Sure, TNT buys a lot of sports too, but so do the broadcasters, and they're fighting with one arm tied behind their back. TNT uses its big ticket sports programming to further jack up the rates that its distributors pay to carry the network.

Most cable networks built themselves off of the reruns of broadcast TV (TNT spends heavily for "Law & Order" and other network dramas, TBS has "Friends" and "The Office" and other sitcoms). That got them audience and revenue to create original programming. Furthermore, those subscriber fees never seem to drop regardless of how a cable network is doing in the ratings. Now that's an industry to be in.

Ultimately cable and broadcast are two very different businesses. Until broadcasters figure out how to build a sustainable second revenue stream or distributors start rebelling against constantly rising cable programming costs, it is absurd to act like this is a fair fight. And frankly, both are facing much bigger challenges than each other. Finally, most big powerful cable networks are owned by the same five media conglomerates that own the broadcast networks, so let's just drop this whole idea of a battle. It's silly and passe.

Bottom line: Running a cable network is like being born on third base and thinking you hit a triple.

-- Joe Flint

Photo (top): Kyra Sedgwick in TNT's "The Closer." Credit: Andrew Eccles /TNT

Photo (bottom): Turner Broadcasting's Steve Koonin. Credit: Turner Broadcasting

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