Outdoor Channel Trims License Fees

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Looking to jumpstart its carriage, The Outdoor Channel is substantially trimming its license fees to distributors, officials said last week.

“We’re on the street with a rate card that has reduced fees and that offers other incentives, in the way of marketing support, for enhanced distribution,” Outdoor Channel CEO Roger Werner said. “It was a response to what our customers were telling us was most important to them. The rates we’re proposing are reduced in the near term, pretty significantly.”

The independent network, which has 29.8 million subscribers, first disclosed the cuts in its license fees when its parent, Outdoor Channel Holdings Inc., filed a 10-K late last month with Securities and Exchange Commission.

In addition, The Outdoor Channel’s affiliation deals with a half dozen of its distributors, representing nearly 60% of its carriage, will have expired as of May 1, according to the SEC filing. The network is close to renewals on some of those deals, Werner said.

An ESPN veteran, Werner said he first talked to distributors about reducing The Outdoor Channel’s license fees when he joined the network last fall.

“We went to the industry with a new rate card that had reduced rates,” Werner said. “It’s what our customers have been asking for. The company in the last two or three years has kind of plateaued in terms of its distribution. One of the primary challenges for me in coming in, to help the company get going again, is to figure out what does the customer need.”

The Outdoor Channel, which will undergo some rebranding changes in May, faces an uphill battle increasing its distribution as an independent network, without the clout and leverage of a media giant behind it.

In its SEC filing, Outdoor Channel Holdings said, “At present our subscriber fees average less than $0.10 per subscriber per month. We plan to reduce these fees somewhat over the next three years as a stimulus to distribution growth.”

Werner there was “substantial discount” on the license fee, but wouldn’t specify how much. But he did say under new carriage agreements “pricing does increase each year going forward, so that we would presumably return to what I would call 'normalized’ rates in years four, five, six of a multiyear deal.”

The Outdoor Channel’s strategy of initially reducing license fees, rather than the norm of increasing them year to year, illustrates how tough it is for smaller networks to increase their distribution. The network also has to deal with securing continued carriage with a number of its major distributors in the next month or so.

“Our distribution agreements with six of the major service providers, accounting for approximately 59% of our subscriber base as of August 2006, will have terminated as of May 1,” the SEC filing said.

But Werner said he’s made progress trying to nail down those contracts.

“We’ve been in negotiations now for several months with a number of our major cable customers and satellite customers, and we’re very close to rolling over and renewing a number of those deals,” he said.

Under Werner’s leadership, in May The Outdoor Channel will drop “The” from its name and revamp its logo. The network also plans an ad campaign to promote its tweaked moniker and new look. Werner will make programming changes as well, like shifting programs into thematic blocks.

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