Many of the new cable networks are celebrating Time Warner Cable’s recent commitment to the FCC to add 15 or more channels to basic during the next five years.
On the surface, Time Warner’s pledge – part of a “social contract” with the Federal Communications Commission, which has agreed to erase 956 complaints of rate-gouging by TW’s cable systems – appears to offer a potential boon to fledgling networks with little or no exposure on MSOs.
“This could open up real opportunities for Bravo and the Independent Film Channel,” says Joe Cantwell, senior VP of affiliate relations and sales for the two networks, echoing the sentiments of a number of other new program services struggling to get carriage on cable systems.
TW is the second largest cable operator in the business, boasting a total reach of 11.5 million subscribers. TW would add the 15 networks to each cable system as it begins to expand channel capacity through such technological improvements as digital compression.
But for a number of reasons, the new networks may be indulging in wishful thinking because other big multiple-system cable operators don’t appear eager to follow TW’s lead and add a bunch of new networks to “expanded basic,” the most widely circulated tier on their systems.
In separate interviews, Bob Thomson, senior VP of Tele-Communications Inc., the largest MSO; Charles Schueler, VP of media and community relations for Cablevision Systems Corp., a top-10 MSO; and Jim O’Brien, president and chief operating officer of Jones Intercable, another top-10 MSO, say they have no plans to sign a contract like TW Cable’s with the FCC.
And even if TW grants a new network’s fondest wish and agrees to place it in front of 97% of the subscriber base, TW will insist on reserving the right to pull the network off expanded basic after a year or 18 months if the service reneges on its programming promises and fails to attract any viewers, says Lynn Yaeger, senior VP of public affairs for TW Cable. In that situation, TW’s cable system would either cancel the network outright or banish it to a tier that would cost subscribers extra.
TW would have to bump up license-fee payments to the network in the event of a switch from basic to a tier that might fetch as little as 10% of the cable system’s subscriber base. But such a move would cause a precipitous drop in the network’s ratings, damaging its chances on Madison Avenue.
Most of the veteran, cash-flow-rich cable networks harvest about two-thirds of their revenues from the sale of national advertising time.
Time Warner New York City Cable Group prexy Dick Aurelio says, “Cable operators have to protect themselves in the event that new networks we pick up don’t keep their part of the bargain and wind up delivering an inferior product.”