Even if the ratings and carriage fees aren’t huge, the value of being in nearly 100 million homes apparently  is.  Brian Stelter at the New York Times writes:

Cox Communications is expected to command close to a billion dollars for the Travel Channel, people close to the bidding war for the channel said on Thursday.

The company is entertaining bids from a number of media companies, including the News Corporation and Scripps Networks, three people with knowledge of the auction said. The people requested anonymity because they were not authorized by their employers to discuss the confidential process. At least one of the offers exceeds $900 million, they said.

[...]

By the ratings and revenue metrics of cable channels, the Travel Channel is undistinguished. The channel, which counts “Anthony Bourdain: No Reservations” and “Man v. Food” as its most popular shows, is distributed in nearly 100 million homes, but it earns on average just 6 cents per subscriber. It draws a modest average of 485,000 viewers in prime time.

More on NYTimes.com

Though $.06 a month per subscriber isn’t much, but Nielsen estimates the Travel Channel is available in 93,990,000 homes.  For purposes of back of the napkin math, I’m fine with calling that 100 million homes and figuring the $.06 per subscriber winds up being around $6 million in subscription revenue per month.

The cable model strives for a split between subscriber revenue and advertising revenue.  If they are able to obtain a 50-50 split, that would be another $6 million a month.  So back of the napkin gets it near $150 million in annual revenue. Fetching $1 billion would be somewhere around a 7X multiple of annual revenue.

It’s clear to me now that the accountants* have taken the reigns at the broadcast TV networks. While broadcast networks used to try and drive profits by pretty much exclusively focusing on increasing ratings, the boys with the green eye-shades are now in control and are trying to drive profits by driving down costs or emphasizing other non-ratings related revenue streams.

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There seem to be a few memes that persist in the TV media world even though there is no data to back them up. One is the “Oprah ratings down because of Obama endorsement”, another is “Look at all the people cutting the cord” (i.e. cancelling their subscription TV service).

Recently it’s been spun as an after effect of the economic problems, in today’s LA Times cord cutting is touted as a combination of technology and consumer choice, which of course it is, and the anecdotal examples are charming, but the problem is the data just doesn’t support the fact that it’s a general phenomenon.

In fact, total subscriptions to cable/satellite/telco TV services continue to grow slowly, as they have for many years.

Who knows what will happen in the future, but it’s not happening now!

Last March I wrote that I was watching four trends (that didn’t involve whether Chuck or Dollhouse got canceled) and one of them was reallocation of existing revenue streams, including retransmission fees for broadcast nets:

[...] especially as advertising rates between broadcast and cable begin to equalize, look for the broadcast networks to get a bigger slice of subscriber revenues.

Reallocating the subscriber dollars seems like something that has to happen, especially if the broadcast networks are the most watched networks  on cable and satellite offerings.  I suspect this will be a very painful process that will occur over quite a few years.

Lately, media coverage of this is heating up, largely due to Rupert Murdoch saying FOX would demand payment for carriage.   In an article Titled “Networks Put The Squeeze on Cable“  Forbes’ Dorothy Pomerantz writes:

Cable stations get paid through advertising and subscriber fees. Why should broadcasters only rely on ads?

LOS ANGELES — At the News Corp. shareholder meeting last week in New York, Rupert Murdoch sent a tremor through the TV world when he announced that the Fox network will no longer be doing business as usual. From now on, Fox will demand payment from the cable, telco and satellite companies that carry the broadcast network.

[...]

Things started to change a few years ago when CBS split from Viacom. Right off the bat, Chief Executive Leslie Moonves announced that he intended to charge retransmission fees for CBS.

“We’re going to get paid for our content by cable operators,” Moonves said at a 2006 investor meeting. “Try running a cable network without the Super Bowl, the Grammys, CSI, The Final Four, Survivor and David Letterman.”

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Hat tip to commenter “Mikey” for pointing out the Forbes story.

OK, sure he runs a studio and not a network, so his biases aren’t the same as his brethren who run networks but I was amused to see Broadcasting & Cable’s Claire Atkinson live blogging some of Warner Bros CEO Barry Meyer’s comments at a B&C conference via Twitter:

Barry Meyer WB chief launching attack on nets giving away shows for free online. We’re training young aud to watch with fewer commercials

Barry Meyer WB CEO, what doesn’t work is digital exhibition of our content. Ind[ustry] is tossing money and premium content down the drain.

Onscreen Barry Meyer WB CEO. There is no free TV, its all pay. Tech should be used to enhance value; we’re underming the base biz model

via Multichannel News:

After two years of winding through the federal courts, an anti-trust lawsuit in California claiming cable and satellite TV operators and programmers harmed consumers by not offering channels a la carte has been dismissed, though the attorney for the plaintiffs vows an appeal.

“That was the plan from the beginning,” said plaintiffs’ attorney Maxwell Blecher, of Los Angeles. “Whichever side lost was going to appeal. That’s what we plan to do and I’m pretty comfortable we’re going to get it overturned.”

That could take some time. Blecher said that the California federal courts are clogged with immigration cases, so an appeal could take anywhere between 18 months to 2 years.

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Though I am on the bandwagon for a la carte pricing as much as the next guy (especially with recent hikes to my cable pricing) it’s a complex issue.  One bad outcome of bundled pricing is you wind up paying for a lot of channels you don’t actually want.   But one good outcome of bundled pricing, I believe, is that there are a lot more channels available than there would be if things were priced exclusively on an a la carte basis.

So, while a part of me is ticked off I’m paying for literally dozens of channels that I never watch, a part of me likes that there are so many channels available.  I might by subsidizing your viewing of HGTV and Lifetime, but you’re subsidizing my viewing of MLB Network and ESPN News.

Without bundled pricing it’s possible that none of those channels would even exist!

This ultimately will be a big story for the economics of the broadcast TV business, if less so for the fans.

Rupert Murdoch wants to charge for access to news-oriented Web sites in the News Corp. portfolio. Now, he’s determined to extract fees from cable and satellite operators to carry the Fox network.

At a company shareholder meeting Friday, the CEO said cable and satellite operators need to pay News Corp. “a small portion of the profits” they gain from offering the Fox network.

The model does not appear to be novel. News Corp. would seek retransmission consent fees from all distributors to carry the Fox-owned local stations. And the company has some leverage — owning the Fox outlet in nine of the top-10 markets.

“We realize this is going to be a tough challenge,” he said. “And we’re determined to take a leadership position in creating an economic template for the future.”

But CBS has pursued that path, as have multiple station groups.

via MediaPost.

There is just no pleasing a network affiliate these days.  NBC has been vilified (at least in the trade press) because The Jay Leno Show is not a good lead-in for the affiliates’ local news programs.   We haven’t actually seen ABC vilified yet even though at least a couple of nights a week it is doing no better (or worse) than Leno.

Now comes word that not even the CBS affiliates are happy with the way 10pm works, even though CBS wins the hour routinely:

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