As the television business
meets this week in Los Angeles for Cable Connection 2010 (click here for
complete Cable Show coverage from B&C and Multichannel News), a slowly
simmering
revolution is starting to boil over. Deal by deal, perhaps even
handshake
by handshake, the standards for where television's biggest-drawing
programming appears--and how it's paid for--are being dramatically
rewritten.
Driving the change: top cable
programmers' unprecedented programming grab, as they snap up properties
once the sole domain of broadcast; and broadcasters' well-publicized
pursuit of first-of-its-kind cash compensation to carry their signals.
At the current clip, within
five years broadcast networks and top-tier cable networks will be nearly
indistinguishable in terms of the type of programming they offer, and
the sub fees and CPMs they command. So for broadcasters, the clock is
ticking.
This transformation, while
it appears a natural one, spells some trouble for broadcasters, who
would be wise to play very close attention to the deals cable is making.
Losing the bragging rights alone is problematic for broadcast troops'
morale and the prestige that commands premium ad pricing. But more
importantly,
it will mortally wound broadcasters' key argument in retrans
negotiations:
that they deserve top-dollar cash for subs because they are the
exclusive
purveyors of the biggest-draw TV.
The current broadcast
negotiating
stance may hold up for the short-term retrans deals being made this
year. By the time this round expires in three to four years, however,
the big nets will need a new retrans pitch--or they will need to plow
that retrans cash right into a new crop of must-have programming that
backs up their current claims. "We've reached an inflection point
where all the multiple-system operators realize they're going to have
to pay to get the signal, and they should pay," Derek Baine, senior
analyst at SNL Kagan Research, tells B&C. "The highestrated
programming in primetime is on broadcast. But the broadcast networks
have to make a decision about what they're going to do."
Will broadcasters fight to
hang onto exclusivity of the big TV properties, death match-style? Will
they come up with the next generation of programming that's cheaper
to produce but still draws consistently big ratings? For broadcasters'
sake, the answers should be yes and yes. Remember: Offense is the best,
well, offense.
Meanwhile, cable's direction
is most certain--it's going after the proven big draws of broadcast.
Turner dropped hundreds of millions of dollars in a matter of weeks
earlier this year to get in the NCAA basketball game and become the
new latenight home for Conan O'Brien. And then there's Oprah Winfrey's
huge move from two decadesplus in broadcast syndication to a joint
venture
cable network, OWN, with Discovery. There will be more to come from
Discovery, too; COO Peter Liguori says to expect more event programming
like the company's HD extravaganza Life
(see Programming Strategy: Liguori's Launch Sequence Commencing).
Baine also expects some "surprising"
announcements to come from Comcast, which is eager to make big moves
on behalf of sports network Versus (the net has swung and missed at
past major sports properties), not to mention what Comcast is likely
to do once it controls NBC Universal. And Viacom has the need and means
to rebrand a number of its networks. "These big media companies have
the money to do it, the credit market is opening up and cable is ready
for growth, so you're going to see a new phase of investment," Baine
says.
On an absolute basis, cable
networks are growing their revenue almost 10% a year, Baine tells
B&C, not just due to their solid affiliate revenue but also
the fact that the ad market for cable has proved "one of the most
resilient industries in the recession." Most of cable's gains in
revenue are getting reinvested in programming, he says: "We've got
cable programming budgets going up 8% in 2010 and 9% in 2011." In
the meantime, Baine projects broadcast programming budgets to be flat.
And that's not going to cut it. This is not to say broadcast should
aimlessly throw more money into its age-old mode of development. We
all know that process is due for some major innovation (see "Is NetworkTV's Model Lost?" B&C, April 26).
But it is time for broadcast
to step up. If broadcast nets are going to buy some breathing room by
adding retrans cash to their coffers or teaming up with cable to hang
onto incumbent rights (read: CBS and NCAA basketball) or an Olympic
bid (read: Comcast and NBCU), they should spend that budgetary air
wisely.
If not, it will be their last gasp of the business as we know it.
comments to mgrego@nbmedia.com and follow her on Twitter: @melissagrego
