M+E Daily
For Smaller Cable Networks, Next Stop: Roku
Story Highlights
By Paul Sweeting
Cable and satellite operators have long complained about high programming costs, particularly when it comes to sports programming. But at the UBS Media and Communications Conference in New York this morning, Time Warner Cable CEO Glenn Britt went farther than most, threatening to drop networks whose carriage fees are out of proportion to their ratings performance.
“As our programming contracts come up for renewal, we’re going to take a hard look at each service,” Britt said. “Those services that cost too much relative to the viewership or value of those services, we’re going to drop them, or we may put them on a different tier.”
He went on to criticize network owners whom he said regard carriage on basic cable tiers as a “birthright,” regardless of their network’s popularity.
“In this business, because we sell a package, we’ve tried to be very comprehensive. Over the years, we’ve accumulated networks that hardly anybody watches. Some are trying to reach the same audience others who may do it better and be more successful,” Britt said. “But if you talk to the people who run these networks, they speak of it as a birthright….We are going to have a different conversation than we had five or six or ten years ago.”
With subscriber rolls falling, cable operators are finding it increasingly difficult to pass along higher programming costs to customers. As a result, the pay-TV ecosystem increasingly looks like a zero-sum game, in which higher carriage fees for the most popular networks begin to crowd smaller networks off basic tiers.
While some of those networks may be able to survive on premium cable tiers, others are likely to try to migrate to over-the-top platforms like Roku, Boxee, Xbox Live or as a branded channel under Netflix or Hulu. While the absence of carriage fees and the smaller reach of those platforms would mean lower revenue in the near term, online platforms also hold the promise of targeting viewers for precisely than traditional pay-TV platforms, presumably resulting in higher advertising CPMs.
In any case, the trend is likely to be a boon to over-the-top platforms, making them a more vital source of original programming rather than mere on-demand conduits for programming already available on cable.
