Tuesday, December 10, 2013

Cable Content Convergence Not To Fear

Today's NY Post talks about smaller, independent cable programmers fearing distribution growth from cable operator consolidation.  "The biggest fear is that a takeover by an operator paying higher fees of an operator paying lower fees will result in smaller programmers being offered the lower fees across the combined, larger system, executives and industry insiders said."  But that is true for all cable programmers.  The other fear is that it gets harder for smaller cable programmers not already distributed to gain a larger footprint as their are less cable operators to negotiate with.  In some cases, a programmer on one operator might even get dropped as the system is merged with another cable operator. 

For cable operators, consolidation means opportunities to renegotiate license fees lower as a result of exceeding certain subscription benchmarks.  A programmer in both consolidated properties will directly feel the effect of lower revenues per subscriber without any increase in subscriber size; the cable operator gets more cost efficiencies.

Gaining space on a cable operator has never been harder and requires deep pockets to spend "marketing dollars" to the cable operator for a channel spot.  I can only assume that an independent channel like Al Jazeera America must have spent a fortune to get back on to Time Warner Cable.  But they may also worry that if Charter acquires TWC that their deal could backfire. 

But cable consolidation should not be viewed as "bleak" according to one independent programmer. The rise of OTT means that other platforms exist to reach consumers.  There may not be high license fees to start but such was the case with cable in the early days, as well.  But OTT platforms would love to make themselves more valuable and interesting to consumers.  Independent programmers should be strategizing where to best position themselves.  Whether it is on gaming platforms like XBox One or Sony's PS4, upstart Aereo, or even struggling platforms like Intel Media.  And don't forget Roku, You Tube, Hulu Plus, and others.  Sure cable operators have the dominant platform today, but not the only one.

Of course there is one other way to try to get on a cable operator platform.  Smaller independents might just want to consolidate themselves.  Perhaps Discovery, ABC/ESPN, or NBCUniversal would be interested in acquiring you.  It is a dog eat dog world and the challenge to grow is to look outside the box or risk being eaten.

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