• by June 2, 2005

WE MAY HAVE REACHED THE END OF THE 500-CHANNEL UNIVERSE, 395 CHANNELS SHORT -- When last we riffed, we talked about how fragmentation in a print medium - book publishing - is on a trajectory in which the number of books published each year might eventually be greater than the number of people who read them. It seems the same fate may be confronting a rapidly growing electronic medium: cable TV. Noting that the average American cable TV viewer now has 105 channels available, Merrill Lynch research analyst Jessica Reif Cohen notes they actually watch only "16 to 18" of them. That suggests, she says, that "we may have reached a point of saturation with regard to start-up cable networks."

Cohen, who made her case in a research note published today, pointed out that, "This is a view shared by executives in the industry, highlighted by Viacom's noting that the usefulness of leveraging retransmission rights to launch new cable nets is now limited."

What that means is that companies that own broadcast TV outlets - like Viacom's CBS and UPN stations - may have less to barter with when they ask cable TV operators to carry new cable channels. But instead of curtailing plans for new cable network launches, some big media concerns are moving aggressively forward with new channel plans. Just yesterday, Viacom unveiled plans for Tempo, a new Caribbean music channel as part of its MTV Networks stable, and as Merrill Lynch's Cohen notes, News Corp. has its Fox Business Channel on the drawing boards, as well as a national sports network that would compete with ESPN.

ESPN parent Walt Disney Co., meanwhile, also appears interested in launching a couple of new targeted networks, although it has been quiet as to what areas it views as positive (although key area of interests are large consumer spend areas - videogames?)," she says.

So how far off of cable guru John Malone's apocryphal prediction of a 500-channel TV universe are we? Maybe not as far as Cohen initially hinted. "Notwithstanding the potential for limited new entries, we do not believe there will be further significant growth in start-up cable networks given the crowded nature of the marketplace and the increasing dearth of uncovered industries/areas of interest," she concludes.

Of course, Cohen is speaking only of TV channels distributed via cable or satellite TV systems. She says nothing about the virtually unlimited capacity of the Internet to stream podcasts, video blogs, personal video networks, or any new incarnation of the TV channel that might come along. And given that trend, we may someday find ourselves with something considerably greater than a 500-channel TV universe. Maybe even one in which there are even more channels than there are viewers to watch them.