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Policy

Retrans Could Hurt Cable Nets

6/06/2011 12:01 AM Eastern

The rapid rise of retransmission-consent
fees could put the squeeze on smaller, independent cable
networks, two top programming chiefs told an audience
at an industry conference
last week.

Viacom CEO Philippe
Dauman and CBS honcho
Les Moonves said
distributors might be
faced with tough decisions
about what
networks are worth carrying
going forward, as
overall programming
costs rise due to retransmission
payments.

Moonves, who has
estimated that CBS will
generate yearly retransmission-
consent revenue
of $250 million by
2012, said he expects
some smaller channels
could face extinction.

SNL Kagan has predicted
that retransmission-
consent fees could
rise to $3.6 billion by
2017, more than double
the $1.5 billion expected
in 2011.

INDIES AT RISK

Dauman said smal ler
niche networks that
are part of a larger programming
entity — like
Viacom’s MTV Networks,
which includes
smaller networks like
CMT and Logo alongside
giants MTV, Nickelodeon
and Comedy
Central — will be able
to survive.

“What you don’t see is
independent networks
coming in,” Dauman
said. “Distributors are
not receptive to new networks
ideas coming from
an independent person. They used to layer on additional
networks like that and money. That’s no longer there.
Those independent networks that don’t have an audience
that cares about them may get dropped. Some of the increases
happen one year when you get retrans and then
they normalize. Maybe there will be margin pressures on
the distribution side. I don’t know. Each situation is different.”

Both men spoke at the Nomura Securities U.S. Media
Summit in New York last week.

Dauman said the key to winning affiliate-fee increases
is providing value.

“We’re not a big driver of the cost,” Dauman said. “We
represent a small portion of the overall cost [of programming].”

Value is an important driver of attracting affiliate-fee
increases, Discovery Communications CEO David Zaslav
said later at the conference.

He pointed to networks such as TLC, which has risen
to become one of the top women’s networks in all of cable,
and ID, which has vaulted from the No. 50 or 60 rated
channel three years ago to the No. 25 spot today.

While most of Discovery’s deals expire in the 2012 to
2014 time frame, Zaslav
said that gives those
channels even more
time to boost their value.

“We have a better
hand,” Zaslav said.

While Discovery has
had some big successes,
the recent launch
of its most high-profile
network — OWN: The
Oprah Winfrey Network
— has not lived up
to its initial lofty expectations.

Zaslav said that he
and Winfrey always
knew that OWN would
take time to catch on
with viewers.

DEFINING ‘OWN’

“We’ve done a lot of
things right and we’ve
done a lot of things
wrong,” Zaslav said.

“We’ve looked hard at
the things that haven’t
worked and said, ‘Why
haven’t they worked?’
We’re talking to the audience
about what it is
they like. We’re trying
to figure out what is the
OWN brand on cable.
In order to be successful
we’re going to have
to fall down a bunch of
times and we’re going
to have to listen to the
viewers. But we have
some really powerful
cards that we haven’t
played.”

He listed among
those cards new shows
like Rosie, featuring Rosie
O’Donnell, and the Winfrey-hosted Oprah’s Next Chapter.

OWN could get a ratings lift after Winfrey’s syndicated
talk show aired its fi nal episode in late May.

Fans will now have to tune to OWN exclusively to
get their Oprah fix, which, Zaslav added, beginning in
September or October will include the vast library of
Oprah shows, currently being re-cut by the talk-show
icon.

September