Skip to main content

All is Not Well with the 'Basic Cable' Model

Investors lowered their expectations for 'basic cable' network values a notch, rattled by incidents of channels abruptly losing chunks of carriage and worries about a potential deceleration of growth for carriage fees. In recent years, basic cable networks sported lofty valuations, evidenced by the $2.7 bil. sale of BET in 2000 and Fox Family Channel (now ABC Family) for $3.7 billion in 2001.

But recent high-profile disputes over fees multichannel platforms pay to channels are contributing to change. Earlier this year, EchoStar Communications' DISH Network dropped women-oriented Lifetime and Outdoor Life Network -- although both were later restored.

"The perception has changed from a wholly-distributed network being an invaluable 'crown jewel' of the media business to a gem of potentially uncertain value when channel carriage contracts come up for negotiation and aren't automatically renewed," says Kagan Research senior analyst Derek Baine. Fully distributed means carriage in 80 million cable/satellite households, out of 94 million total multichannel households.

"Lifetime is a perfect example," Baine notes. "Five years ago, no one would ever have thought a cable or satellite platform would drop a channel as big as Lifetime. But earlier this year EchoStar did just that. Eventually Lifetime's carriage was restored but only after a very acrimonious battle."

Cable TV operators � which on average in 2005 paid 22 cents per month for each basic cable channel � have become less willing to fork over higher carriage fees at contract renewals. They are also faced with big carriage rate demands from over-the-air TV broadcasters. And cablers see that TV programs are increasingly non-exclusive, with availability via download on handheld devices such as Apple's iTunes and on websites.

Finally, mushrooming numbers of cable networks � Kagan Research tracked 58 national channel launches from 1994-2003 � mean more overlap in channel content and increased audience fragmentation, notes Baine. The result is cash flow margins for channels have been rising � up 10 points over the past decade to around 35 percent � while cash flow from cable operators' TV channel business has declined over the past 10 years. "Cable operators are digging in their heels because they are tired of the value shifting from cable to the programmer," Baine explains.

Popular posts from this blog

How Cloud Fuels Digital Business Transformation

Across the globe, many CEOs invested in initiatives to expand their digital offerings. User experience enhancements that are enabled by business technology were a priority in many industries. Worldwide end-user spending on public cloud services is forecast to grow 21.7 percent to a total of $597.3 billion in 2023 -- that's up from $491 billion in 2022, according to the latest market study by Gartner. Cloud computing is driving the next phase of digital transformation, as organizations pursue disruption through technologies like generative Artificial Intelligence (AI), Web3, and enterprise Metaverse. Public Cloud Computing Market Development "Hyperscale cloud providers are driving the cloud agenda," said Sid Nag, vice president at Gartner . Organizations view cloud computing as a highly strategic platform for digital transformation initiatives, which requires providers to offer new capabilities as the competition for digital business escalates. "For example, generativ

Mobile Device Market Still Awaiting Recovery

The mobile devices market has experienced three years of unpredictable demand. The global pandemic, geopolitical pressures, supply chain issues, and macroeconomic headwinds have hindered the sector's consistent growth potential. This extremely challenging environment has dramatically affected both demand and supply chains. It has led to subsequent inflationary pressures, leading to a worsening global cost of living crisis suppressing growth and confidence in the sector. In tandem, mobile device industry stakeholders have become more cautious triggering market uncertainties. Mobile Device Market Development Operating under such a backdrop, the development of mobile device ecosystems and vendor landscapes have been impacted severely. Many of these market pressures persisted throughout 2022 and now into 2023, borne chiefly by the smartphone market. According to the latest worldwide market study by ABI Research, worldwide smartphone shipments in 2022 declined 9.6 percent Year-over-Year

Subscription Payments will Exceed $15.4 Trillion

The recurring subscription payments market is undergoing significant growth, primarily driven by the acceleration of consumer adoption. The market deals with periodic subscriptions to a variety of goods and services offered as an alternative payment model. While subscriptions have existed for a long time, their use in the consumer products marketplace is still evolving. Despite the usage being relatively new, the proliferation has been rapid and has spanned many different vertical markets. Recurring Payments Market Development According to the latest worldwide market study by Juniper Research, the transaction value of recurring payments will exceed $15.4 trillion globally in 2027 -- that's up from $13.2 trillion in 2023. This relatively slow growth of 17 percent reflects that recurring payments are a well-established market, but also disguises a rapid change of payment methods in the space, with Open Banking and Digital Wallet payments outstripping overall growth. As more retail me