This may seem like an old story: Cable networks are spending lots more on original programming. While content has been always important, new marketplace dynamics offer a different picture of rising programming investment.
News abounds that sports costs have primarily been fueling this trend. ESPN has seen major cost growth, and no doubt will see more from the likes of the NFL. Programming costs have risen 50% in in five years to $5.2 billion
And there is more to come -- especially from non-sports-oriented cable networks looking to compete for viewers’ eyeballs with original scripted dramas and comedies, as well as reality shows.
Cable networks are now more like broadcast networks, which also spend big money on programming. The future for both cable and broadcast nets comes down to owning content and then selling it to old and new digital distribution services.
But more immediately its’ about cable networks facing what broadcast networks have been subject to for decades -- viewership erosion. Many big, established cable networks are seeing this more every season.
This means cable networks cannot stop producing -- or purchasing -- big-time original series. Cable operators still bring in the majority of cable network revenues. But that’s not growing as fast as it has, and networks find themselves needing to grab more market share. In turn, they can then raise rates.
Right now cable networks aren't too scared of this scenario for one reason: they still get and depend on a strong financial formula of dual revenue streams from national advertisers as well as affiliate fees from cable operators.
Though many broadcast networks have entered the same game -- through retransmission deals with those same cable operators -- they are still way behind. If the average network-owned station or affiliate is getting 50 cents to 70 cents per subscriber a month, many cable networks are way ahead. Turner networks get $1 or more. ESPN gets $4.
News Corp.'s Chase Carey is right. If those numbers are correct and you look at actual viewership comparisons, networks like Fox should get more than even ESPN currently does.
Sure, content has always been king. But, in the future, analysts will dissect this big generality, and cable networks will need to make more qualitative adjustments.
Quality content will be the king of kings, perhaps the only type that'll attract viewers' interest and money.