Twenty-five years ago, cable networks that have evolved into powerful brands with vast distribution and broad appeal — services such as Cable News Network, USA Network, The Weather Channel and Nickelodeon — were just getting launched.
Today, there are throngs of cable networks. This year alone, Fox Reality Channel and gay-targeted Logo debuted. And during the last five years, a new wave of fairly narrowly targeted services arrived.
Catering to America’s increasingly diverse population, many of these new networks were aimed at various segments of the Hispanic audience, as well as African-Americans and Asian-Americans.
That boomlet of networks was one of several significant developments on the cable-network front in the past few years — changes that will shape the medium’s future.
Boosted by a huge upswing in original programming, as well as sizable distribution gains, ad-supported cable in the past five years has overtaken broadcast in terms of primetime audience share. Such a victory was unimaginable a quarter-century ago. And the trend doesn’t seem anywhere near ending.
For example, so far this summer broadcast’s primetime share is 32.6, almost less than half of cable’s 60.7, according to a Turner Entertainment analysis of Nielsen Media Research data. In the comparable period in summer 2001, broadcast’s share was 41.9 versus cable’s 48.5, according to Turner, marking the first season that cable moved ahead of broadcast.
“That’s been an interesting swing,” said Jack Wakshlag, chief research officer for Turner Broadcasting System Inc. “In the summer of 2001 it was reasonably close, six share points, roughly. Now the difference is almost 30 share points.”
Despite new leisure-time options like the Web, overall TV viewership is up — and cable is driving that growth without cannibalizing itself.
“If you look at the Top 20 cable networks, the surge in viewing has been huge,” said Betsy Frank, executive vice president of research and planning for Viacom Inc.’s cable networks, film and publishing.
With MSOs and direct-broadcast satellite providers offering lineups with hundreds of channels, cable programmers have been able to expand their footprints and get in front of more eyeballs. As of this month, there are 37 cable networks with distribution of a whopping 80 million households or more, according to Nielsen Media Research.
“You’ve got a lot of fully distributed cable networks,” Wakshlag said. “We know that the number of channels have gone up in the average American home. It’s been a great boon for a lot of cable networks.”
In addition, during the past five years cable has also solidified its position as the dominant TV player in genres such as news, sports, nature documentaries, animation and kids’ shows. It has also taken the lead in producing the long-form programming that was once broadcast’s forte — namely original movies and miniseries.
Industry veterans credit cable’s explosion of original content — solid hits like TNT’s The Closer and USA Network’s Monk — with propelling its audience levels ahead of broadcast’s.
ORIGINAL MOVIE BOOM
In 2001, there were 75 original basic-cable movies, according to Tim Brooks, Lifetime Television’s executive vice president of research. As of July this year, there have already been 66 such movies, and “there will probably be over 100 for the year,” Brooks said.
In terms of new original series on cable, in 2001 there were 72. In 2004, there were nearly double that number — 120 new shows, according to Brooks.
“Both in original movies and original series, there is clearly an explosion of product out there,” he said. “A hit series [on cable] used to be a 2.0. Now a hit series has got to be a 3.0 or better. … In terms of amount of programming and the size of the hits, it just gets bigger and bigger.”
Cable networks show no signs of retreating from their commitment to more original programming, because this content becomes even more valuable currency going forward. That’s because analog networks, in order to continue increasing their revenue, have no choice but to offer their content on new platforms beyond traditional television, according to cable executives.
Scripps Networks, which includes Home & Garden Television and Food Network, has been aggressive on the Internet side from the get-go and is pushing hard on the video-on-demand and — most recently — on the broadband front, according to Ken Lowe, CEO of Scripps Networks’ parent, E.W. Scripps Co.
“We’ve always believed in moving beyond the basic-cable network,” said Lowe, HGTV’s founder. “Our initiative is broadband. We think that broadband allows us to bore even deeper and get more targeted in our categories.”
'HYPER-NICHE’ WEB NETS
Scripps’s broadband channels — which Lowe calls “hyper-niche channels” — will offer highly specific content within the programmer’s current lifestyle categories, starting off with kitchen design under the HGTV brand in December. Scripps is planning about 10 of those broadband services in the next 18 months.
“That’s where we see the next five years really evolving for us,” Lowe said. “To take our brands, continue to hone them, keep them focused, but also offer these broadband niches. And with full-motion video now, and high-speed Internet continuing to ramp up, they are going to be very significant.”
Many of Lowe’s programming brethren agree with this approach.
“A cable network was something that used to be something you could see just on TV,” NBC Universal Cable president David Zaslav said. “Now, we’re offering content on a wireless basis within most of the cable niches for viewing on cell phones. We’re offering content over the Internet.
“We’re offering opportunities for people to pick the best of what’s available on a lot of our channels, either through VOD or through a number of new devices that are developing.”
The bottom line is that to continue to grow, cable networks have to aggressively move beyond the traditional 24-hour linear channel, cable officials agreed.
“The entire distribution model, that monolithic model, is just crumbling,” Brooks said. “You have to, if you want to be prepared for the future, do what these other entertainment industries have done in the past, which is maintain your position as a content provider but be agnostic as to the platform.”
Successful cable networks “in the future may have as much revenue outside of cable advertising and sub fees as they do in that traditional business model,” according to Zaslav.
The traditional cable-network business model no longer works for startups in an era in which MSOs are more concerned about growing their digital platforms via VOD, or increasing high-speed data subscribers via broadband-content services, than adding more broad-based analog channels.
“We joked when we started that we would be the last analog network, and now it’s not a joke,” said Geraldine Laybourne, CEO of Oxygen, which debuted in 2000.
Similarly, Lowe believes the opportunities for any new analog channel to get traction are shaky.
“I don’t think realistically that we’re going to see any new channels created that will reach 80, 90 million household penetration, just because it’s just so much more difficult today,” he said. “There’s so many more channels, and of course a lot of the distributors want now to be in the content business.”
Scripps did debut a new network, Fine Living, in 2002. It’s now in 28 million homes, and while Lowe doesn’t expect it to hit 80 million homes, he said the channel is in the key upscale markets advertisers love.
“Can it reach 40 million, can it possibly reach 50 million?” Lowe said. “I think so. And the importance there is that it needs to be in the right 40 or 50 million. … It comes down to the old test of who wants to watch this, and is there an affinity group out there that has enough mass that somebody like Procter & Gamble down the street will be interested in reaching that audience group.”
In the past five years, a slew of ethnic-targeted services have been launched, including Spanish-language networks like ESPN Deportes. Their rollout is in response to the evolution of the TV audience and “the growing diversity of the U.S. population,” according to Frank.
“The rise of the Latino population as a growing major minority in the country and how more and more a desire to create brands to satisfy these growing parts of the audience,” Frank said.
NBC Universal earlier this year rolled out Telemundo Puerto Rico, a domestic service that offers programming from the company’s WKAQ-TV in Puerto Rico.
“It isn’t likely to be competing with Sci Fi and USA for a broad audience,” said NBCU Cable’s Zaslav. “What we’re pushing, and you can see there’s a little bit of movement in the marketplace this way, is to try create networks that address a specific need and have an appeal to a group that’s likely to feel strongly about it, or have a strong affinity for it.”
Cable programmers said that the most important thing for them to consider during the next five years is that the consumer is in control.
“We can’t force the consumer to conform to our business models,” Frank said. “We’ve got to fit in with their lives and their business models and that’s the only way all of us are going to survive.
“We will need to create content that can live not just across not just the TV screen, but broadband and the Web and wireless, and probably a couple of more places that we’re not even able to see now.”