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Big Shows Contributing to Cable Network Declines

Cable network ratings are down, and steep declines among some big shows are part of the reason, according to a new report from analyst Michael Nathanson of MoffettNathanson Research.
Nathanson says that C3 total day ratings are down 9% in 2014. While some of that decline is likely due to Nielsen's inability to count viewers if they're not glued to the living room set, "it's hard to ignore our long-held belief that technology (DVRs, VOD and SVOD) is disrupting viewer consumption of linear network programming."

In recent years, cable networks have generated big profits at high margins, taking ad dollars from broadcast and distribution revenue from cable operators. But that seems to be changing. Cable ad revenue was up a mere 1% in the fourth quarter. And business has gotten particularly tough for certain types of networks.

"For programmers of general entertainment and kids networks, our analysis shows that GRPs are highly concentrated among a few old and fading shows— many being off-net acquisitions. Cornerstone shows like Law & Order, NCIS, The Big Bang Theory and movie nights are falling fast with few new hits immediately available," Nathanson says. "As such, the cable network business model is moving to riskier and more expensive original programming, which will likely come at the expense of profit margins once SG&A costs cuts are lapped."

Which programming is most at risk?

Among the biggest decliners were A&E's Duck Dynasty and Storage Wars, but others on the downswing were once-dependable off-net ratings generators like Law & Order, NCIS, Big Bang and Castle.

"The massive ratings declines at general entertainment networks also coincide with a broadcast pipeline which is increasingly made up of more serialized dramas and less procedurals and half-hour sitcoms," Nathanson says.

Of the highest rated shows on broadcast this season 12 of the top  50 have yet to hit traditional syndication. But Nathanson says eight are first-year shows, and not quite ripe for sale. "Chicago Fire, which will have three seasons under its belt by the end of the broadcast season, is the only show that stands out as potentially available near-term for the cable syndication market," he says.