• by Wayne Friedman , June 13, 2006

Competition from Internet and other digital platforms won't get in the way of cable networks anytime soon--the industry will continue to grow at double-digit revenue pace.

Kagan Research estimates that collective cable network revenue--primarily from advertising sales and cable system fees--will climb 13.1 percent to $33.8 billion over 2005's results. That would be higher than the 12.7 percent number in 2005 over 2004's number--which took in $29.9 billion in 2005--but not as much as the 13.6 percent in 2004 over 2003.

ESPN continues to be the market leader--taking in some $3.7 billion in 2005. Its nearest competitor is $2.1 billion behind--Nickelodeon. After that come TNT, FSN, MTV, and USA--all topping $1 billion in revenue. The next ten networks have revenue greater than $500 million. Typically, a cable network's revenue comes 60 percent from advertising revenue and 40 percent from cable operators' fees.

Kagan says "barring a recession, ad revenue will remain in double-digit growth territory for the foreseeable future." It also expects that license fees--the fees that cable networks charge cable systems--will continue to rise on an annual per-sub basis from 2 percent to 5 percent per year.

Kagan also predicts that cable system and satellite operators will continue to shuffle channel lineups, including dumping some established networks because of poor quality ratings.

Major media conglomerates could have trouble launching new cable networks--especially spin-offs, says Kagan. The situation will be worse for independently owned networks--which will find it almost impossible to get carriage without the backing of a major cable system operator.