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The Future of Cable’s Independent Voices
On Jan. 1, Time Warner Cable rang in the New Year by dropping our network, Ovation, from its channel lineup. Other independent networks may face the same fate.
This is not an isolated incident, but the disturbing result of years of consolidation in the pay TV industry, with a small number of dominant carriers offering the networks of a small number of media conglomerates. The result is the homogenization of cable TV and the betrayal of cable’s promise to deliver diversity. Policy makers, concerned citizens and industry leaders need to understand and seek to arrest this trend before it is too late.
Ovation’s circumstance illustrates the general situation. Our network is dedicated to the arts. While that appeal may be less popular today than Here Comes Honey Boo Boo, experience confirms a broad level of interest and our commercial viability. Until Jan. 1, Ovation was delivered to 51 million homes, up from just 5 million in 2007. That makes us the sixth fastest-growing cable network in terms of distribution. According to Nielsen, our ratings are up 55% year-over-year, which makes us the fourth fastest-growing cable network by ratings.
So why drop us?
Time Warner Cable’s chairman and CEO has indicated that it is about economics. He has claimed that cable companies need to crack down on escalating programming costs. But that argument doesn’t withstand scrutiny. Ovation costs TWC pennies per month per subscriber. Compare that to the several dollars per month that cable operators pay for sports networks, retransmission of broadcast networks and for the bundle of networks provided by the media conglomerates. At less than one-tenth of 1% of TWC’s programming spend, Ovation’s costs are barely a rounding error.
TWC has also argued that it is about ratings — that Ovation doesn’t have a big enough audience to justify carriage. Again, the facts tell a different story. Looking at the most recently available data for third-quarter 2012, Ovation’s average weekly audience reach (as a percentage of total distribution) was higher than that of 23 other networks TWC carries, including ESPNU, ESPN Classic, Centric, Logo, VH1 Classic, Fuel and Fuse.
So what’s really going on? The answer isn’t economics; it’s power. Networks like those mentioned above are not independent — they are owned by The Walt Disney Co., Viacom, News Corp. and Madison Square Garden. When TWC negotiates with these companies, it is dealing with more or less equally matched goliaths.
Ovation is entirely independent. And like so many other independent networks, when we negotiate carriage with cable and satellite companies, we are like David without a slingshot. We have no “leverage” with which to extract equitable deal terms. We can’t threaten TWC to withhold “must have” broadcast networks or sports programming. It’s one of the many reasons why independent networks are generally less well distributed than non-indie nets, and why, according to SNL Kagan data, the indies get paid, on average, a fraction of what bundled networks are paid.
All we can do is demonstrate the growth of our audience and appeal to TWC’s sense of responsibility to its viewers and to the communities that have extended franchises to it. Unfortunately, with respect to Time Warner Cable, that argument has proven insufficient.
To be clear, TWC is in not solely to blame for this situation. It is but one actor in an industry- wide trend. But that trend is real, and it is deeply troubling. The fact is that there are more than 60 sports channels on TWC, some of which TWC itself owns and distributes on its basic-programming tier. And every year, more and more sports and conglomerate-owned networks are launching, and fewer and fewer independents are on the dial.
Ostensibly, Federal Communications Commission regulations are supposed to protect diversity on the dial. In reality, though, the adjudication process takes years, is subject to endless appeals and requires a company to invest millions in litigation costs. For a small company like ours, the process offers no real protection.
It is time to reverse this trend. Pay TV remains the single most important platform for Americans to get news, information and entertainment. It must not devolve into a collection of sports channels, pay-per-view porn channels and conglomerate-owned entertainment and news channels.
After the stroke of midnight on New Year’s Eve, millions of Time Warner Cable households lost access to the only arts network on the dial. That’s a lousy way to start 2013.
The way to salvage this year is to use this event and others like it to begin a real conversation about how we are going to ensure independent networks have a place on the cable dial. If we don’t do it now, by next New Year’s there may be little diversity left to save.
Chad Gutstein is a partner in and chief operating officer of Ovation.