SNL Kagan: Net may need to drop license fee to gain U.S. foothold

Al Jazeera may have only one option to gain a strong foothold in the U.S.: Drop its license fees down to nothing.

In a new report, SNL Kagan said that Al Jazeera may have to make the move in order to gain widespread carriage in the U.S. The Qatar-based news org completed its acquisition of the low-rated Current TV on Wednesday and was immediately dropped from Time Warner Cable (although TW Cable had made indications pre-sale that it would no longer carry the network).

“We think Al Jazeera may have to drop the license fee to zero in order to gain widespread support for carrying the channel in the U.S., a move that would certainly imperil its economic model, which relies upon license fees for 80% of the network’s revenue,” the report stated.

The deal cost Al Jazeera about $500 million, which works out to about $10 per subscriber, “a decent price for a struggling network like this,” according to analyst Derek Baine. But Baine also noted that the “valuation is quite large given the tenuous nature of the channel’s carriage.”

TW Cable represented 9 million of Current’s 59 million subscribers. While the cabler said it would drop Current “as quickly as possible,” it has seemed to soften that stance a bit.

“We are keeping an open mind and as the service develops, we will evaluate whether it makes sense, for our customers, to launch the network,” TW Cable said in a statement issued Thursday.

Dish Network, DirecTV and Comcast have given no indications that they’re looking to cut carriage of Current TV in light of Wednesday’s acquisition.

SNL Kagan predicted $108 million in revenue and $16.4 million in cash flow for Current prior to TW Cable’s decision to drop the network, but that move has brought the group’s predictions down to break-even, according to the report.

Al Jazeera is perceived by some observers on the right as carrying an anti-Western bias, and its acquisition of the left-leaning network run by former vice president Al Gore and Joel Hyatt has sparked controversy.

On Friday, the Christian Film & Television Commission issued a statement applauding Time Warner Cable’s decision to drop the network and urging viewers not to tune in to Current TV’s programming.

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