Analysis: Small cablers need to gain scale, or face an increasingly tumultuous set of headwinds
If you’re a small cable outlet without massive corporate backing, the Weather Channel offered a forecast last week that should be troubling: continued storms and fog.
The independent network raised eyebrows recently when it ended a three-month spat with DirecTV that resulted in changes to its afternoon programming schedule; a promise to bring back more instant local weather information; and granting DirecTV the right to show its programming across multiple devices to people who can prove they are subscribers to the satellite broadcaster.
That sounds like a lot to do in order to get a price increase that, according to several press outlets, did not even amount to a penny per subscriber. But wait, there’s more. In a decidedly unconventional move, Weather Co. Chairman and CEO David Kenny offered a written apology to DirecTV and its customers in a press release announcing the defrost in relations between the two parties: “Our apologies to DirecTV and their customers for the disruption of our service and for initiating a public campaign. Our viewers deserve better than a public dispute, and we pledge to reward their loyalty with exceptional programming and more weather-focused news.”
If cable and satellite viewers “deserve better than a public dispute” when TV networks and cable and satellite companies walk away from contract talks, well, it’s news to the rest of the industry. No matter the players – CBS and Time Warner Cable or Walt Disney and Cablevision – a public airing of grievances seems part of the playbook. Can you recall anyone else apologizing for trying to mobilize the public after a network goes dark on a major distributor?
You don’t need a meteorologist to tell you what Weather Channel’s capitulation means for the TV business. It’s just the latest signal that heft matters in the ongoing dance between TV outlets and the companies that distribute their content to the world. And if you don’t have it, well, this party may not be for you.
One doubts you’d ever see the head of a larger operation – say Viacom’s cable networks or Time Warner’s Turner unit – express regret for making a public case for a network that has gone off the air. Nor are you likely to see NBCUniversal’s USA network change its programming schedule for the privilege of getting its transmissions back on Cable Company A or Satellite Distributor B.
For smaller outlets, however, increasingly difficult headwinds will be an ongoing part of the forecast. Crown Media’s Hallmark Channel and Hallmark Movies & Mysteries outlet are still not available on AT&T’s U-verse – nearly four years since the networks went dark on the video service after the two parties could not come to an agreement on distribution conditions. (A spokeswoman for Hallmark said the two sides remain in discussions.) Or consider the case of Ovation, the independent arts network that was thrown off Time Warner Cable for 10 months at the start of 2013 when the distributor decided the network didn’t offer up enough original fare to warrant carriage. Ovation returned in October after vowing to add hundreds more hours of new content.
Such fights result in much more than a black eye. More original programming represents, no doubt, additional investment for Ovation. Having to trim repeats of its reality programming presumably keeps Weather Channel from some amortization of the bevy of non-fiction series it has launched and continues to promote to advertisers.
These donnybrooks are bound to break out more frequently, particularly as the programming fees networks cadge from their distributors become a more meaningful part of revenue. Since the 2009 recession, networks have tried to tamp down their reliance on ad cash, which can fluctuate with the economy and is being spread thinner as more digital options – think mobile devices and streaming video – prove viable alternatives to the boob tube.
When you’re part of a larger entity, it’s easier to draw lines in the sand and wait it out (not that retransmission agreements are getting any less difficult for bigger players). But it’s nice to have must-carry programming from, say ESPN or CBS, to lend leverage to an important discussion. Indie cable outlets lack that muscle, and it’s likely to hurt them in a world in which Comcast and Time Warner Cable consolidate or where parallel discussions with players such as Discovery Communications help set a tone for the market.
Weather Channel’s tumultuous talks wrap just as indie cable is getting more attention. Just look at the recent launches of El Rey, the maverick network built around the artistic sensibilities of film director Robert Rodriguez; Revolt TV, the music-themed outlet run by Sean Combs; or Aspire, the African-American themed network that includes Magic Johnson as one of its executives. Or consider Nuvo TV, the Latino-themed cable outlet that recently purchased music-centric Fuse from Madison Square Garden Co.
Nuvo’s maneuver is noteworthy, because having Fuse on board gives the company more scale. At a time when consolidation among video distributors seems inevitable given new competition from streaming-video outlets like Netflix, Hulu, and, perhaps in the not-too-distant future, Apple, staying small seems a dicey business prospect.
As the Weather Channel learned, it’s one thing to report on tornadoes and quite another to be able to cause them, even if it’s just a business windstorm and not a real whirlwind.