Network affiliate-sales teams are adapting to serve a world with fewer and fewer MSOs.
Surprisingly, cable-operator consolidation hasn't forced all cable networks to cut back from their affiliate-sales ranks, even though the teams now have fewer MSO corporate headquarters on which to call.
But some programmers say they have restructured their affiliate-sales divisions and shuffled duties to reflect the dwindling number of distributors.
Executives at some of the largest programming companies maintain that although there may be fewer MSOs to service, cable networks still need a sizable complement of affiliate-sales staffers for several reasons: To cover "the field" by lobbying cable operators on the system and regional level for carriage; to sell new networks that are still rolling out; and to coordinate efforts on new aspects of the business, such as interactive TV and broadband.
The cable industry has been consolidating for the past decade, and ESPN has restructured its affiliate-sales force several times to reflect marketplace conditions as well as its own growing portfolio of products, noted executive vice president of affiliate sales and marketing Sean Bratches.
"While the number of MSOs has declined, the amount of content, and scope of content they're deploying on their platforms, has increased," Bratches said. "ESPN's affiliate sales staff has grown over the past three years in the products it offers and in the number of people."
Affiliate-sales teams must still make their case to cable operators on the local and regional level. That still takes manpower.
"Working with the field is hugely important," said Turner Broadcasting System Inc. president of domestic distribution Andrew Heller. "Even though a lot of deals get done in corporate, you need the buzz in the field. You need people in the field calling the corporate office and saying, 'I want you to do a deal. I want to launch this network.' "
Programmers are also still adding networks to their stables, which means there are still many fledgling services striving to build distribution. And that's in addition to the renewals that must be negotiated for mature services.
"The velocity of activity around here has increased fourfold from three years ago," said Fox Cable Networks Group executive vice president of affiliate sales and marketing Lindsay Gardner. "There is no such thing as a simple sales call for us anymore.
"Operators and satellite distributors are as likely going to talk to us about our established, broad-based channels such as FX or Fox Sports Net as they are talking about our newer channels, like Fox Sports World or Fox Movies or Nat Geo [National Geographic Channel]."
In addition to their longstanding task of seeking distribution, cable-network affiliate sales teams are also starting new units or assigning workers to shepherd — and drum up — new-media business on the interactive and digital fronts.
For example, ESPN recently created a broadband and interactive television sales unit as part of its affiliate-sales department, according to Bratches. And Heller has a team that works with affiliates on interactive and enhanced television, coordinating distribution of Wink Communications Inc.'s service.
In this era of MSO consolidation, the trend seems to be for affiliate-sales forces to be structured as hybrid models and organized so that staff members are assigned duties for MSOs at both the corporate and regional levels. That's the way it is at Turner and ESPN.
For example, ESPN's affiliate-sales force is divided into three divisions: Eastern, Central and Western. Each of those divisions, in turn, has two regions: the East has the Northeast and Southeast.
According to Bratches, the most senior executives in a region will service the large MSOs headquartered in their area — Time Warner Cable corporate in the East region, for example. The next tier of affiliate sales officials in the East would handle, on a corporate level, second-tier MSOs in that region such as Mediacom Communications Corp. and Insight Communications Co.
In the East, senior affiliate-sales officials would also handle regional duties such as cable systems in the New York DMA, as well as Time Warner Cable's corporate offices.
"So each individual would have corporate responsibility and regional responsibility," said Bratches, whose unit has roughly 100 employees. "Their effectiveness at both levels is enhanced."
That's similar to the structure Turner instituted several years ago, although Heller's staff has in fact been downsized during the past three years, by 10 to 15 percent.
"We have groups dedicated to specific MSOs that still have regional responsibilities," Heller said. "They get together on a regular basis, to talk about what's going on in systems. When they get launches, they talk about what they had to do to get them, and what the channel lineups look like.
"They exchange best practices and worst mistakes on a regular basis. I'm a huge believer in that you have to talk about what works — and maybe more, you need to talk about what doesn't work."
While many programmers have regional affiliate-sales offices scattered around the country, Turner's only satellite office outside of Atlanta is in San Francisco, where it has 12 employees.
"I'm not convinced that [regional offices] are an efficient way of doing this business," Heller said. "It's better to have people that are mobile. And it's nice to have as many of them as possible in Atlanta so they can all have a focused, unified vision of what our goals and objectives are.
"With regional offices, no matter how hard you try they don't get enough access to information. They don't hear the scuttlebutt in the office. It's difficult."
KEEPING KEY EXECS CLOSE
At Fox Cable, the responsibility for the dozen largest MSOs rests in Los Angeles, where the programmer's team includes Gardner and his senior staff. Like Heller, Gardner wants his key affiliate-sales people at a central location so everyone has a handle on the same information.
"I don't want the knowledge of what's working with one distributor broken up among different people," Gardner said. "I want one dedicated group of people to know everything of consequence that's going on, in terms of deals with our largest distributors."
Fox Cable's affiliate sales and marketing unit, with 96 people, also has 10 regional offices outside of Los Angeles.
"They are responsible for everyone below the top 12 [distributors] and for distributors' regional, state and local executives," Gardner said.
Fox Cable's affiliate-sales group — which Gardner said has "slightly more people today" than it did three years ago — has had a busy year. It's No. 1 in percentage growth among programmers in terms of subscribers.
"That's a function of the people here and News Corp.'s support, making the distribution success of these networks a priority and putting resources into it," Gardner said.
From June 2000 to June 2001, Fox Cable gained 54.2 million subscribers across its cable networks. That's a 43 percent increase for a stable that includes FX, Fox Movie Channel, Fox Sports Net, National Geographic Channel, Fox Sports World, Fox Sports World Español and The Health Network.
Discovery Networks U.S. was second, picking up 50.9 million homes for a 17 percent gain.
Even with MSO consolidation, cable-network officials agree that they must court and win over cable operators in the field, at the local and regional levels. Gardner said a perfect example of that was Fox's success with National Geographic Channel at Charter Communications Inc.
Fox Cable spent nine months trying to close a corporate carriage deal for National Geographic with Charter. Gardner made several trips to St. Louis, and even met with then-Charter chief Jerald Kent.
On another front, Fox Cable's field group was meeting with all of Charter's regional and local executives, and making presentations about NGC.
"I needed those people validating the service," Gardner said. "But as it turns out, the field was even more crucial and more valuable than I even foresaw."
Charter's corporate deal with NGC obliged it to offer the channel to 600,000 subscribers by June 30. But the MSO far exceeded that benchmark, placing the service in 2.5 million homes by that date, according to Gardner. That jump was because of the support the channel had mustered in the field, Gardner said.
NGC is also paying cable operators upfront cash launch fees in the $3-to-$5 range.
Bratches also believes in working the field, as well as the corporate office, in order to drive distribution for ESPN's various networks, which offer sports programming that MSOs are under subscriber pressure to carry.
"We do top-down selling at the MSO level and bottom-up selling at the system level," Bratches said. "System management is integral in the decision to launch product, even in centralized companies.
"There are instances where macro deals will mandate distribution at the system level. But we are also out there selling our product on the system level, the regional level and the MSO level."
In particular, cable operators such as Comcast Corp., Charter and Cox Communications Inc. all allow systems the latitude to decide which networks to carry, according to Discovery Networks U.S. executive vice president of affiliate sales and marketing Bill Goodwyn.
In affiliate sales, Discovery has an MSO group that deals with the top eight distributors, as well as offices in Charlotte, N.C., Bethesda, Md., and Los Angeles that handle geographic territories, Goodwyn said. His department has about 70 staffers.
That's smaller than in previous years, a trend Goodwyn claimed is a function of attrition.
At one point, Discovery had a separate unit that handled distribution for its digital networks. Next year, the programmer will probably return to that structure, according to Goodwyn.
A&E Television Networks has an executive in charge of its digital networks — The Biography Channel and History Channel International — who works with the rest of the programmer's affiliate-sales team, according to vice president of affiliate sales David Zagin.
Comedy Central — which functions like a stand-alone network, even though it's co-owned by media giants Viacom Inc. and AOL Time Warner Inc. — is slowly approaching full distribution at 77 million homes. Affiliate sales, in its case, has evolved into more of a marketing function.
"Our role used to be getting more subscribers and renewals," said executive vice president of affiliate relations Brad Samuels. "The subscriber job is nearly done now, so now we're primarily marketing on behalf of the network to drive tune-in and to increase our value in the eyes of our distributors."
FEWER, TOUGHER DEALS
How much harder is it, in this era of both MSO and programmer consolidation, for networks to launch or increase their distribution? It's extremely tough, according to Goodwyn, since the programming titans have bargaining chips — such as TV stations, sports services, and upfront cash launch fees — that they can used as leverage with cable operators during carriage negotiations.
"Three years ago, you might have had to do 15 deals," Goodwyn said. "Now you may not have 15, you might have eight. But those eight are real difficult, because all the networks are trying to do business with those eight.
"And they've only got so many slots, and a lot of those slots are eaten up by the leverage those [programming] behemoths that are able to command through regional sports, or sports or retransmission consent."
Nonetheless, executives at Turner and Fox Cable argued that the quality of the programming is what drives distribution of their services.
"Obviously, guys out there are willing to pay a lot of cash to get carriage," Heller said. "The truth is, that has worked fairly effectively over the past couple of years. But I think a lot of that stuff is coming home to roost.
"Most of the cable operators today would tell you, 'We're not so glad we did that.' They did it a time when The Street was really focusing on their cash flow. And the truth is, while it still goes on and it still works, they'd rather have new programming, differentiated programming, low-cost programming, than be paid big up-front payments with big license fees on the back end."
Gardner stressed that each deal is different, and played down the role that retransmission consent for Fox Broadcasting Co.-owned TV stations has played in his ability to secure launches for Fox Cable networks.
"Retransmission consent was never a global magic bullet," he said. "It was something of value a handful of the largest operators wanted, but by no means all of them."
He agreed that renewals for Fox's regional sports networks were also "occasionally an incentive" in landing affiliation deals for other programming services.
Gardner also has the benefit of using his entree to other divisions of his parent company, News Corp., on behalf of an MSO or its parent company.
"Sometimes, we can clinch a deal by making an introduction to someone at the movie studio, or at [publisher] HarperCollins," he said. "But most of the time, it is just the traditional money, launch support and good programming, in exchange for bandwidth and license fees. And there is very little else involved."
Distributors who now carry the Fox Sports Digital networks are offering them because they want the services, according to Gardner.
FOCUSING ON QUALITY
"There is no other carrot — no launch support, no free time, no, 'You scratch my back I'll scratch yours,' " he said. "They really want the channel. And that's also every deal we have for Speedvision."
The current challenge for affiliate-sales forces is to get MSOs to focus on their need for quality programming, according to Heller.
"At the moment, cable-modem sales, upgrading to digital boxes, and providing [electronic mail] and all sorts of enhanced services are very lucrative to the cable guys, and are areas they would like to focus on," he said. "They are starting to realize again that multiplex pay, and pay-per-view aren't enough, and they need more content. The consumer is clamoring for more content.
"And as operators start to experience churn, they realize that they need to refocus both on how they sell it and how they package it, and what networks they're offering as part of their digital package," Heller continued. "And that is driving them back to needing new, strong content."