Entertainment Industry

Category: Big Media

The cable television industry's conundrum

NFL football Steelers Cardinals

When assessing the future health of an economy, experts pay close attention to a particular measure: inflation.

That's why some Wall Street analysts are monitoring runaway inflation in cable TV network programming. A recent study by consulting firm SNL Kagan calculated that cable TV networks' content costs have climbed at an annual rate of 9%. Some cable channels, primarily those that offer sports, have experienced even greater increases.

Take ESPN.  In 2006, the cable sports juggernaut spent $3.5 billion to program the channel. This year, the Walt Disney Co.-controlled network spent $5.2 billion -- an increase of nearly 50%. General entertainment channels, including TNT, TBS and History Channel, also have witnessed staggering increases as they ramp up original productions to compete with the broadcast networks.

Although cable channels continue to be the most profitable divisions of their parent media companies Disney, Time Warner Inc., NBCUniversal, News Corp. and Viacom Inc., the trend is worrisome.  Consumers eventually will feel the sting of the higher costs.

Read the full story in Thursday's Los Angeles Times.

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Cable TV networks feel the pressure of programming costs

-- Meg James

Photo: Arizona Cardinals running back Beanie Wells during a game against the Pittsburgh Steelers in Glendale, Ariz.  Credit:  Paul Connors / Associated Press

Media chiefs confront challenges facing cable TV industry

CABLESSHOWS

A sense of urgency surrounds the annual National Cable & Telecommunications Assn. convention in Chicago this week as big media firms grapple with a host of business challenges that threaten their livelihood.

An onslaught of new technologies, devices and digital-content-delivering platforms and the nation's  growing wealth divide are challenging the cable television industry to no longer take for granted customers who shell out $70 to $100 a month for service.

Young consumers, in particular, do not seem to share their parents' affinity for their pricey cable and satellite TV packages, and are increasingly drawn to the Internet and to services including Netflix and Hulu for entertainment.

The health of the cable industry is crucial to the rest of the entertainment pipeline because it is cable and satellite operators who underwrite the high cost of television programming.

While industry leaders tried to put on a brave face, not everyone was buying it. Typically, question-and-answer sessions at industry conventions turn into fan-fests with softball questions, but Tuesday's opening panel, moderated by Fox Business News anchor Liz Claman, had a sharper tone. 

Claman suggested that cable leaders who said they weren't seeing evidence of cord-cutting -- or people who cancel their cable subscriptions in favor of lower-cost Internet options -- sounded a little too much like Wall Street bankers who, in early 2007, didn't believe the failure of a few subprime mortgages would be much of a problem. 

Viacom Chief Executive Philippe Dauman sought to downplay the threat. He said the cable industry not only survived but thrived during the recessions.  Millions of people didn't cancel their cable subscriptions despite stretched incomes, he said, because they regard their pay TV subscriptions as a good value.

"That's the story here," Dauman said.

But Time Warner Cable CEO Glenn Britt was more cautious. 

"There clearly is a growing underclass of people who can't afford the services they want.  It would behoove all of us to work together to meet the needs of that population," Britt said. "Most of the people want everything but not everyone can afford it. The economics of all of us [programmers and operators] make that difficult, and it would serve us well to worry about that group of people."

The audience broke into applause.

Patrick Esser, president of Cox Communications, said an increasing segment -- estimated at 40% of the U.S. population -- no longer have enough extra money, after the cost of food and housing, to continue to pay their rising TV bills.

"We have to be very sensitive that we serve customers," Esser said.  "They either have disposable income or they don't. I worry more about that than cord-cutting -- making sure we have the products and services, and their affordability."

The panel, which also included News Corp. Chief Operating Officer Chase Carey and Time Warner CEO Jeffrey Bewkes, stressed that the industry must figure out ways to support the cost of making entertainment and delivering it to consumers.

"Don't be afraid of your children," Bewkes said. "Put the TV on the Internet devices, and don't change the business model and don't charge people extra. Make it easy for them to use it."

This spring, Time Warner rolled out its HBO Go option for subscribers to watch HBO programming on their iPads and other mobile devices.  Bewkes said such user-friendly experiences were key.

And the cable industry, which also sells broadband Internet service packages, must improve data transfer speeds to deliver high-quality video.

"We really all have to remember this: It is this infrastructure, this industry, that allows for quality audio and visual display of material," Bewkes said. "We ought to keep rolling this out as quickly as we can so the consumers get a seamless adoption of better technological quality and access to what they want, when they want it. It's all in this room."

-- Meg James

Photo: The cable industry invades Chicago: Credit: NCTA.

 

The Morning Fix: Emmy loves broadcast. Disney may really have sold Miramax! ESPN-LeBron backlash

After the coffee. Before avoiding all the reviews of "Inception."

Is it really over? Walt Disney Co. has struck a deal to sell Miramax to an investor group led by construction executive Ron Tutor with backing from Colony Capital, a private equity firm, and James Robinson, chief executive of production company Morgan Creek. If this deal actually closes, it will bring to an end to months of high-stakes negotiations and a battle among three potential suitors, including Miramax founders Bob and Harvey Weinstein. Former Disney executive Richard Nanula, now with Colony, is expected to oversee operations at Miramax for its new owners. More on what may be the final chapter from the Los Angeles Times and the Wrap.

Explaining Emmy. When hundreds are nominated for awards, it can make finding a trend difficult. But try we must, and with some new shows on broadcast television -- "Glee," "Modern Family," and "The Good Wife" -- doing very well, the verdict seems to be that network television is back. Well, certainly it was a good season, but it's not like HBO, Showtime, AMC and other cable channels were overlooked by Emmy voters. I'm still wondering how the voters could snub Khandi Alexander of HBO's "Treme." And why do they keep ignoring FX's "Rescue Me." Analysis on the nominations from the Los Angeles Times, New York Times, Variety and Hollywood Reporter.

Fleeing Sun Valley. Friday is when the media stalkers exit Allen & Co.'s Sun Valley mogul gathering after three days of chasing executives and being escorted by security to the bathroom. So here are the wrap-up stories from the New York Times and Wall Street Journal that, quite frankly, could have been written before the conference started. No digs at my media pals intended; I've been there and know the drill. You do the best you can with what few morsels you can get. At least the Idaho setting is beautiful and there are some good restaurants in town.

The 10% factor. The Hollywood Reporter's Matthew Belloni takes a look at the verdict against Walt Disney Co. in its battle over profits from the game show "Who Wants to be a Millionaire?" with the show's creator, Celador Productions, and the role that agents played in the relationship between the two companies. William Morris agents were put in an awkward position throughout the trial, and the verdict may have some rethinking the way packaging fees for shows are doled out to agencies.

ESPN and LeBron: The Aftermath. ESPN's deal with LeBron James, in which the basketball superstar got to handpick his interviewer and sell the network's ad time (for charity) in return for telling the cable channel where he was signing, has been heavily criticized in the media. Here's our Thursday story and a take from Friday's New York Times. Ex-ESPN analyst Dan Patrick said on his radio show Friday that the Thursday night program was "an infomercial" and that the network covered this "like it's 'American Idol.'" Not everyone is ganging up on Disney's ESPN though. Here's a defense from the Daily Beast. Meanwhile, super-agent Ari Emanuel is taking credit for helping put together the show, which, given the reviews, may not be something to boast about.

Inside the Los Angeles Times: "Eclipse" is expected to rule the weekend again at the box office, but its pacing is trailing its predecessor, "New Moon." More bad news for Mel Gibson.

-- Joe Flint

Follow me on Twitter and I won't abandon you for Miami: Twitter.com/JBFlint

The Morning Fix: Zucker's final big deal? Disney wants to make Facebook into Amazon. Icahn and Lions Gate grid for battle

After the coffee. Before figuring out how the Supreme Court's new Miranda ruling would have been handled by 'Law & Order' if that show was still around.

That's Conan O'Brien cash! The New York Post says NBC Universal Chief Executive Jeff Zucker will walk away with between $30 million and $40 million after Comcast closes on its deal to acquire control of the entertainment conglomerate. Claire Atkinson writes that the details to Zucker's exit package are being finalized and that the embattled CEO will leave "a couple of months" after Comcast seals its deal. NBC parent GE denied there is an exit package, as did NBC. Of course, most industry observers do expect Zucker to leave when Comcast takes over. As for the cash, well, if Conan O'Brien could walk away with that much for his stint as "Tonight Show" host, it seems only fitting that the man who put him there get the same amount. That's sarcasm, folks.

Them's fighting words. Investor Carl Icahn said he is prepping for a proxy battle with Lions Gate Entertainment, the small production company that he has a stake in and is trying to take over. He again extended his offer to shareholders of $7 per share and tossed out the requirement that a minimum number of shares must be tendered for his offer to take effect. So far, there have not been a ton of takers on his offer, which values the company at about $800 million. The latest on this soap opera from the Wall Street Journal and Los Angeles Times. Wonder if the box office from "Killers" will lead Icahn to up his offer. OK, I don't really wonder that.

Great! A new way to be annoyed on Facebook. Walt Disney Co. is using Facebook to hawk tickets for the latest "Toy Story" movie. According to the New York Times, people will be able to buy tickets to the movie without leaving Facebook and prod (or is bug a better word?) their friends to come too. The NYT says this "could transform how Hollywood sells movie tickets by combining purchases with the powerful forces of social networking." I'll put it another way. This is the latest example of over-commercialization of social networking sites, overly aggressive marketing and the demise of privacy. Guess I know why Disney didn't pitch me the story.

ABC thinking pay? ABC, whose parent Walt Disney Co. is already a partner in the online video site Hulu, is looking at creating its own online subscription service for its content. According to Engadget, ABC has conducted some online surveys to see what the response to this would be from folks. NewTeeVee contacted ABC about this and the company said: “In order to better understand our audience as the digital marketplace evolves, we constantly conduct research on a variety subjects to garner useful insights."

Ever wonder why people don't like the media? The Wrap provides us with an answer to that with this article on what Al and Tipper Gore's separation could mean for the cable network Current TV that the former vice president founded. A cynical attempt to get Web traffic disguised as analysis, the story goes on to say that, uh, nothing would likely happen to Current TV as a result of a Gore divorce. When Rupert and Anna Murdoch divorced, did she walk away with Fox News?

Inside the Los Angeles Times: Patrick Goldstein says Ashton Kutcher and Lions Gate shouldn't joke around about piracy. Here's that story on dwarf wrestling you've been dying to read.

-- Joe Flint

June is only 30 days. Make it memorable by following me on Twitter at: twitter.com/JBFlint


House Judiciary Committee to hold hearing on Comcast-NBC deal in Los Angeles

In an unusual move, Congress' probe of cable giant Comcast Corp.'s merger with NBC Universal is going on the road.

SHARPTON On Monday, the House Judiciary Committee will hold a hearing about the proposed $30-billion deal at the California Science Center in Los Angeles. The hearing, which will be open to the public, was pushed by Rep. Maxine Waters (D-Los Angeles), a Judiciary Committee member who has also been pressuring the Federal Communications Commission to hold hearings on the deal outside of the Washington area. Although field hearings are not unheard of, they are seldom used in the case of mergers.

Waters has emerged as one of the sharpest critics of the deal and has expressed concern about how the combination of Comcast with NBC will affect minorities. She sent a letter to the FCC with 50 questions for Comcast and NBC about their hiring and programming practices. This is the second crack the Judiciary Committee will get at NBC and Comcast executives. Last February, the committee held a hearing that dragged on almost seven hours and included NBC Universal Chief Executive Jeff Zucker being grilled by Waters over what she feels is NBC's lack of diversity in its programs.

Although Waters is worried about the merger, another prominent African American politician and activist, the Rev. Al Sharpton sent FCC Chairman Julius Genachowski a letter last week supporting the merger and praising Comcast and NBC .

"The Comcast-NBCU joint venture has the potential to mark a new era in media and communications in which all consumers, from every demographic background, can more easily and economically reap the benefits of easy access to content across multiple platforms," Sharpton wrote.

-- Joe Flint

Photo: Al Sharpton. Credit: Stephen Chernin / Associated Press

Biden, industry big shots to discuss piracy fight

Vice President Joe Biden, Atty. Gen. Eric H. Holder Jr. and FBI Director Robert S. Mueller III are among the top government officials meeting with entertainment industry leaders Tuesday afternoon at the White House to discuss how best to fight piracy of intellectual property.

In its release detailing the meeting, the White House said the round-table discussion that Biden will lead is aimed at showcasing the Obama administration's "commitment to enforcing laws against the piracy of intellectual property."

Industry chiefs who are expected to be participating in the meeting are Viacom CEO Philippe Dauman, Warner Bros. Entertainment CEO Barry Meyer, NBC Universal CEO Jeff Zucker and Sony Pictures CEO Michael Lynton. Directors Guild President Taylor Hackford will also participate. Other government bigwigs scheduled to be at the table include Commerce Secretary Gary Locke, Homeland Security Secretary Janet Napolitano and Secret Service Director Mark Sullivan.

No word if Michaele and Tareq Salahi will also be dropping by.

-- Joe Flint

Big media's new research coalition's mixed message

It's not an academic exercise. No, it's a research foundation. It's a competitor to Nielsen. No, it's not a slap at Nielsen at all.

WURTZEL Confused? We are too. The conference call detailing the media industry's creation of the Coalition for Innovative Media Measurement (see our earlier post) sent out a few mixed messages. Let's hope their efforts to develop new and better ways to measure ratings are a little clearer.

NBC Universal Research President Alan Wurtzel opened the call, saying the coalition  was "neither a trade or academic organization" as all the members have "skin in the game" and it's "time to take our future into our own hands."

Pretty tough talk. Yet a few minutes later Wurtzel went out of his way to say the purpose of CIMM was not to build a better Nielsen.

"This is not about establishing a competitor to Nielsen," Wurtzel stressed. In fact, he added, this was "never really about Nielsen."

So lets get this straight. A group of media giants including News Corp., NBC Universal, Walt Disney Co., CBS, Viacom, Time Warner and Discovery are getting together with Procter & Gamble, AT&T, Unilever and several major advertising agencies to do research on how to better track media consumption -- and it's not about Nielsen?

POLTRACK CBS's Dave Poltrack said the purpose of this organization is to "support innovative research," but that if anything is actually developed for commercial use, that would be done independent of the coalition. 

Missing from the list of industries involved is new media (no Google, no Yahoo), which is interesting because one of the things this organization stressed is that it wants to find a better way to measure media consumption online and on mobile devices. That doesn't mean the group won't be adding new members who are able to pony up the entry fee. The companies involved would not say how much they have raised in funding but indicated it was in the seven figures. The entry fee to be part of CIMM is not seven figures, however. 

This is not the first time there have been efforts to build better systems to measure audiences, and it certainly is needed. Nielsen has had lots of issues over the past few years with its measurement systems, and if a bunch of big companies getting together can help encourage them to shake things up, that's not so bad. In fact, CIMM is not against having Nielsen join its efforts if it wants to apply for membership.

A Nielsen spokeswoman said the ratings firm "shares all of the objectives" of the coalition and "has always worked closely with clients to bring innovation to the industry." The company said it looks forward to working with CIMM and would like to hear more about its plans. 

So would we.

-- Joe Flint

Photos: Top right: NBC's Alan Wurtzel. Credit: NBC Universal. Bottom left: Dave Poltrack of CBS. Credit: CBS


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