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Cable vs. broadcast isn't a fair fight

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

 
Comments () | Archives (12)

Broadcasters should be ashamed for not addressing their outdated business model, but ad supported cable shouldn't be so quick to celebrate. After 30 years in business, aren't the cable networks finally at the point where they should have their sub fees adjusted based on their ratings for that previous year? Seems like it's time for the cable net to change as well. A business model that assumes that the consumer will pay regardless of how a cable network performs doesn't seem to be good public policy.

The whole idea of "package deals" is outdated as well. To pay for 100+ channels when maybe 10 are really watchable seems unfair to the consumer. We should be able to pick and choose. And so, I'm subscribing to netflix. At a mere $20 a month (cheaper than any cable package). I get to see what I want. Albeit a little later, but so what?

I would like to read more and more and more about this industry and what we all sit down with our families to watch. Thank you.

Umm..isn't NBC a cable company(NBC Universal)? Doesn't ABC have a parent company's revenue stream(Disney/Marvel)?

I know I am showing my age, but I grew up in the time when your cost of admission to watching television was the cost of your TV and possibly the cost of an antennae if you lived out from the stations. It didn't cost anything on a monthly basis once you paid for the TV. You didn't have 250 channels, you had 3 or maybe 4 network channels and they competed very hard for your viewing time. They lived on the ads they could sell based upon the number of people estimated to be viewing their station. True performance based operations. There was also censorship. I wonder how many TV shows and movies could pass those censors today? How many crimes are spawned from watching movies and TV shows today? Have we really progressed?

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


Big fan of Ron Bennington?

I gave up on cable 15 years ago when they went above $20 a month. They had guaranteed the rate would remain the same but broke the agreement and so I never went back. They were no better than broadcast, and eventually I think they had more ads. If they drop to $5 a month I might reconsider, but really $2 a month is all it is worth. As the depression gets worse, I expect they will be glad to get $2 a month, but there may be few able to afford that then.

Think this is why we really need to get "a la carte" type service from cable and satellite.

I'd love to be able to get the local channels and ESPN and maybe a few other sports networks. I could live without the local networks even, since I get them with an antenna. But my cable provider wants to charge me $65 a month for "expanded basic" (the cheapest package which includes any sports channel). This just isn't worth it to me.

Joe, not too long ago the Turner folks wouldn't buy anything off net unless their internal estimates showed a +40% profit on the associated cost. I'd venture to guess they still work the same way. That's some business!

What's nice about 'cable' is that it's not so watered down and "family friendly." I enjoy shows like The Shield and Rescue Me and Battlestar Galactica. Can you imagine how ... sanitized... those shows would have been if they were on broadcast? Blah. Not everything needs to be primetime kid friendly.

Adam, one more time you've got it right. The local stations do not want to look at the inevitable but then again neither do the msos. While is is nostalgic to look at what was, we still haven't gotten to what is. Having spent a good part of a career at this very subject, perhaps the complete collapse sill convince them. Oh, well - sometimes that's what it takes.

Well, Bob's got a point, and an important one at that. The real problem is how broadcast tv stations have come to somehow be responsible for content children might see, instead of the people who are ACTUALLY responsible for what they might see: their parents and guardians. If this country was into 'personal responsibility' at ALL, this wouldn't even be an issue. Of course, we're living in an ever-growing nanny state, where somebody ELSE is ultimately responsible for our actions.

Until the grown-ups actually...well, GROW UP and take personal responsibility for themselves, things like broadcast television will continue to suck and cable broadcasters will continue to take advantage of that fact. Its all a numbers game, and the sad reality is WE are to blame for the high costs we are now facing.

Personally, I have no concern for what ANY network shows at any time of day; I'm a PARENT - part of my job is to know whats going on with my children every minute of every day. Because of this, I already know that none of the Big Three (or any of the others, for that matter) are polluting the minds of my children. How can they be, when I take my personal responsibility to raise and protect them seriously? Its really high time that the adults in this country begin placing blame where it belongs instead of requiring the government and corporations to raise their children for them.

DJ
Janet Jackson could have flashed way more than a nipple and I wouldn't have batted an eyelash...my kids don't WATCH sports, they PLAY them! (Another rather.....'large'.....issue in America today, no?)


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