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An Amazing Story of Cable Network Margins

Someone should create a Margin Channel to tell the story of cable network economics.

In its new “Economics of Basic Cable” report, research company SNL Kagan notes that the average cash flow margin of cable networks is “amazing.”

These channels make a lot of money for their owners. Even though there are some networks with negative cash flow margins, emerging networks with low margins and sports networks whose high costs limit margins, the average for the industry was 41% in 2010 and is expected by Kagan to increase to 41.9% in 2011 and expand further to 44.9% by 2015.

Even the recession was unable to slow the growth of cable network margins.

In 2010, Kagan estimates that there were 30 cable networks with cash flow margins of 50% or more. “By 2015, this number should almost double to 58, with an additional 61 having margins in the 40% to 50% range,” Kagan says in its report. That means that 66% of the 180 cable networks it track would have margins of 40% or better.

According to Kagan, the network with the highest margin in 2010 was Viacom’s Nickelodeon, the leading kids network, at 64.6%. With that kind of profitability at stake, it’s not surprising that the company launched an investigation with Nielsen when its ratings took an unexplained dive in September.

Scripps Networks Interactive’s Food Network whips up a 60.5% margin, while the news at NBCUniversal’s CNBC World and CNBC are margins of 59.9% each.

The rest of the top 10 in terms of cash flow margins according to Kagan are: Viacom’s VH1 Classic at 59.3%; Discovery Communications’ TLC at 58.7%; The Walt Disney Co.’s Disney Channel at 57.7%; Scripps’ HGTV at 57.1%; Discovery’s Discovery Channel at 57.0%; and AMC Networks’ AMC at 55.4%

Other noteworthy networks with margins of 50% or higher are top news channel Fox News, non-commercial TCM, niche target BET, original scripted programming driven FX, and very funny TBS, which has owner Time Warner laughing all the way to the bank.

Michael Malone, senior content producer at B+C/Multichannel News, covers network programming, including entertainment, news and sports on broadcast, cable and streaming; and local broadcast television. He hosts the podcasts Busted Pilot, about what’s new in television, and Series Business, a chat with the creator of a new program, and writes the column “The Watchman.” He joined B+C in 2005. His journalism has also appeared in The New York Times, The Philadelphia Inquirer, Playboy and New York magazine.