Smaller but nimble a winning formula

Does cable have it too good?

The industry’s top execs would never say so, and certainly they have their own dragons to slay. But at the Variety Entertainment & Technology Summit “State of the TV Business” panel on Monday, it was hard to avoid the conclusion that while broadcast nets are trying to reinvent the wheel, cable is giving its tires another coat of Armor All.

“We have a better business model,” Comcast Entertainment prexy-CEO Ted Harbert said. “It’s not (broadcast’s) fault. They didn’t do anything wrong. They’ve got a single revenue stream, which will change soon thanks to retrans, which it should, because they do deserve retrans fees, so that will make it more of an equal playing ground. But there are several other things that cable does well that allows us to have a profitable business model.”

“The facts are the facts,” Harbert added. “We deliver a very significant profit, and most broadcasters don’t.”

With the broadcast networks focused on imminent pilot decisions, Harbert was joined on the panel by Lionsgate TV president Kevin Beggs, USA original programming prexy Jeff Wachtel and Turner programming head Michael Wright. Pilots remained part of the conversation, as evidence of how broadcast can be bogged down by a process that cable nimbly works through.

“For every ‘Two and a Half Men’ and now ‘Big Bang Theory’ that’s going to make hundreds of millions of dollars — that sets the bar, and that’s the expectation,” Beggs said. “So it becomes difficult on the selling side, but then you have to create a financial model going in that makes sense … because it’s so expensive to make a broadcast show that you’re in such a deficit you can almost never get out of it.

“The way we engineer it is we want to be break even or profitable going into every show … and then, wild success, if we get eight seasons in cable and can sell 100 (episodes), or the homevideo becomes something special as it has been for ‘Weeds’ and ‘Mad Men.’ Then you’re actually seeing real value. But just depending on the back-end sale is very tricky these days. We can’t hope that that’s going to happen.”

With confidence in their fundamentals, the cablers are essentially tinkering now, whether with the ratio of original to acquired programming or, as Wright suggested, pursuing more cable-to-cable programming deals.

“While it might not be a $100 million ‘I’m gonna go buy a mansion’ payout, it’s a revenue stream,” Wright said.

For all the talk about broadcast and cable dichotomy, Wachtel said the conversation is already beginning to change.

“I think we’re in the big moment right now,” he said. “There’s something going on in the way the next generation processes information (and) processes entertainment that everybody talks about. …So maybe people won’t be talking about broadcast vs. basic vs. premium.

“Probably over the next few years, the broadcast networks all have to figure how to handle this extraordinary R&D expense and this lower ratio of success, and figure out a way to increase that ratio of success,” Wachtel said. “And if that means programming fewer hours, maybe that’s it.”

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