In today’s economy, everyone’s looking for ancillary revenue streams, and cable networks are no exception.
“It’s a combination of brand-building and good business,” says Laura Caraccioli-Davis, VP/director at ad-buying firm SMG Entertainment, a division of Starcom Mediavest Group, Chicago. “The great thing about cable is that it’s always had that dual revenue stream going for it, so in the early days they never had to play in that ancillary space.
“But when you look at some of the networks and their slate of original programming and their commitment to it, I don’t know if they’re necessarily able to make both ends meet through subscription and ad sales (while investing in original programming).”
While most cablers have video sales or licensing deals, some networks are going beyond usual revenue streams to add more to the company’s coffers.
Lifetime is venturing out in several different ways.
It recently launched Lifetime magazine and also counts LifetimeTVStore.com, Lifetime Books and Lifetime Music among its primary brand extensions.
“We’ve extended into many areas, trying to touch a woman’s life in as many ways as possible,” says Rick Haskins, exec VP of Lifetime Brand. “First and foremost, it’s getting our name out there to the consumer and reinforcing the brand. Secondarily, it helps us get ancillary streams of revenue. And the more streams you have to protect your downside, the more successful you’re going to be.
“The reality is — like every other basic cable network — we are reliant on how the ad market goes. If you can become less reliant on the shifts of the ad market and more reliant on other streams of revenue, I think you’re going to be able to withstand those ups and downs better.”
E! Networks has found in-flight programming to be a strong ancillary market, supplying Delta Airlines and Cathay Pacific — among other airlines — with E! and Style! programming blocks.
“There are good revenues with the in-flight business, but the other side is definitely brand extension and awareness,” says Duccio Donati, VP of international sales for E! Networks. “You have the opportunity to show your programming to a captive audience and really give them a sense of what you’re all about.”
E! Networks hopes to expand its ancillary markets by providing on-board programming for cruise ships. Given the average cruise lasts seven days, ships will go through larger programming blocks than the average two-hour blocks airlines use.
Discovery’s 13 networks all have special areas of interest, but Discovery’s most important ancillary market might be a surprise: educational products. It produces programs for Cable in the Classroom.
Discovery’s Web site markets a wide variety of custom educational products to teachers.
“Right now we calculate that our products are used in about 80,000 classrooms, K-12, across the country,” says David Leavy, Discovery’s senior VP of corporate affairs and communications.
The key to any successful ancillary business is that it has to make sense with the network’s image, such as Discovery’s foray into educational products.
But Discovery’s efforts don’t end there.
License to promote
“Licensing opportunities are something we’re trying to take advantage of in an aggressive way, whether it’s a ‘Monster Garage’ tool kit (based on the net’s new series) or a ‘Trading Spaces’ bed-and-bath line,” Leavy says.
Haskins says Lifetime has rejected several opportunities, including a Lifetime credit card, spa and even a retail store.
“We get things all the time that are so out of our realm of business savvy that we don’t feel it’s worth putting our time and attention behind it. I’d rather focus on those things that are closer to the parent brand and make those successful.”
E!’s Donati sees untapped ancillary markets all around.
“Pretty much wherever there’s people sitting down waiting, you’re going to find some sort of entertainment for them there,” he says. “And television’s an easy one because it’s relatively inexpensive and can entertain a wide group of people with one medium and one screen.”
Bottom line: the ad community likes networks that can reach their customers in several ways.
“It’s really important for advertisers to be associated with these brands off-air,” Caraccioli-Davis says, adding that cable networks’ successful ancillary markets benefit advertisers, too: “It shows (network) brands are healthy when they’re going out and expanding their footprint. That provides more reach for advertisers, and not just television reach.”