A combination of continued quarterly subscriber erosion, the shift of their best programming to streaming platforms and declining affiliate-fee growth could help accelerate the demise of linear TV as we know it, according to a MoffettNathanson report.   

In a report released Wednesday, MoffettNathanson senior analyst Craig Moffett noted that in the not-too-distant past, when streaming was gaining subscribers at a torrid pace, Wall Street and most of the content industry wasn’t too concerned with declines in the traditional linear-TV business. Now, with streaming growth hitting a rough patch — Moffett described it as “descendent — not necessarily declining, but the bloom is assuredly off the rose” — more attention is being paid to the linear business. 

Moffett noted that despite its relatively uncool current stature, linear TV is still paying the bills. Linear TV revenue, at $86.3 billion, is nearly four times that of streaming ($22.6 billion), he said. That could pose problems for content creators as their core linear business — pay TV — is declining at a 6% annual clip, with some major components — cable and satellite — flirting with 10% declines.

Moffett pointed to former The Walt Disney Co. chairman and CEO Bob Iger, who said at the recent Code conference that “linear and satellite TV is marching toward a great precipice, and it will be pushed off. … I can’t tell you when, but it goes away.” Moffett and other analysts have been predicting the demise of the linear TV model for years — last year, former Bernstein and current Wolfe Research analyst Peter Supino estimated that DirecTV would disappear in five years — and others have estimated that given the current rate of decline there was little hope that pay TV would survive 10 years down the road. Now, Moffett says that cable companies, focusing more on broadband and wireless opportunities, seem to have thrown in the towel on video. 

The two largest cable companies — Comcast and Charter Communications — don’t see video as the critical piece of the business it once was, according to Moffett. Charter in particular, he wrote, appears particularly frustrated with media partners that make decisions that are increasingly counter to their best interests, like raising prices and shifting expensive programming such as sports to direct-to-consumer products. 

Cable operators like Comcast have responded by introducing products geared toward broadband-only subscribers, like Flex, which offers an array of free streaming video options along with easier access to apps for subscription services.

“Both Comcast and Charter have made it clear they are fully willing to let video customers walk, even to the point of helping them with streaming options if they desire,” Moffett wrote.  

Also: Could Comcast’s and Charter’s Streaming Platform be the Launching Pad for Something Bigger?

According to the analyst, with the best scripted entertainment shifted to streaming and regional sports networks (RSNs) falling from lineups, linear is left with news, some sports, reality shows and “scripted leftovers.”

“With more and more must-have sports content now being made available on streaming platforms — not just by Comcast and Paramount on their streaming platforms, but by Amazon and Apple as well — the linear model is hanging by a thread,” Moffett wrote.

That is coupled with the continued erosion of traditional pay TV subscribers, which reached another new nadir in Q2. 

Pay TV Erosion Persists

Overall pay TV subscribers fell 6.1% in Q2, with cable, satellite and telco providers all reporting steep declines. Cable TV led the walk of shame with 1.048 million fewer linear TV customers (a 7.8% decline), while satellite TV shed 635,000 subscribers (a 12.5% decline) and telco TV lost 223,000 customers. Overall, traditional pay TV lost 1.95 million customers. Including virtual MVPDs like Sling TV, DirecTV Now and Hulu Plus Live TV, pay TV providers shed 1.9 million customers in the period, according to Moffett.

Pay TV penetration of occupied households fell to 50.5% in the period, its lowest level in 30 years, according to Moffett. And virtual MVPDs, which have previously taken up some of the slack from cable losses, are no longer doing so. Virtual MVPDs showed a gain of just 42,000 subscribers in Q2, with gains at YouTube TV, Philo TV and Vue (an estimated 250,000 subscribers) and DirecTV Now (56,000), barely offsetting losses at Hulu Plus Live TV (100,000), FuboTV (109,000) and Sling TV (55,000).

But while the continued loss of subscribers is concerning — but not necessarily surprising — the continued decline and emphasis on streaming video also is having an impact on network affiliate fees. According to Moffett, aggregate media affiliate fees grew 1% in Q2, its lowest rate since Q2 2020, which was driven by the pandemic. Cable-network affiliate fees were flat (0% growth), but Moffett warned it could be lower because subscriber losses haven’t yet been factored in. Broadcast retransmission-consent revenue growth, impacted by pay TV subscriber erosion for years, was just 8% in Q2, compared to 13% last year. 

Retrans, License Fees on the Wane

Moffett has estimated that retrans revenue growth will flatten out to 7% by 2025, but added that affiliate fees could shrink into negative territory as larger content companies like Disney and Fox face possible declines. According to Moffett, Fox’s affiliate fees rose 2% in Q2, Disney’s were up 1% and NBCUniversal’s were flat  in the period, but the rest of the sector — Warner Bros. Discovery (-2%), Paramount Global (-2%) and AMC Networks (-7%) — showed declines.

For the moment Moffett is sticking to his forecast that cable network affiliate fees will be flat in 2022 and through 2025, but noted that may be optimistic.

“We are hurtling to the 50 million to 60 million U.S. Pay TV subscriber level that we have always offered as the ‘floor’ due to sports and news,” Moffett wrote. “The question now is whether sports and news will turn out to be the bulwark we’ve always expected.”

Moffett added that regional sports networks are beginning to fade from traditional distribution outlets and vMVPDs, while two of the largest media conglomerates are making their biggest sports properties non-exclusive to the linear bundle. Online juggernauts like Amazon and Apple have already dipped their toes into the sports business, and as the NBA contract comes up for renewal in two years, are expected to at least circle those properties, possibly driving up the price for ESPN and TNT. 

“The problem, in other words, isn’t so much demand as it is supply … and where (else) that supply can be found,” Moffett wrote. ■  

Blackouts of cable networks have cost programmers a total of $179.5 million in lost affiliate fees since 2013, according to a report by Kagan, a unit of S&P Global market intelligence, with more than $18 million of that hit occurring in 2020 alone.

According to Kagan, ViacomCBS has lost the most in affiliate fees over the past eight years — about $40.1 million — with most of that occurring between Oct. 1, 2014 and Aug. 23, 2017,  the dates the programmers’ channels were dark to Suddenlink Communications systems. That 1,057-day blackout cost ViacomCBS about $38.6 million in lost affiliate fees, according to Kagan. Verizon Communications’ 1,567-day carriage dispute with Comcast’s then-owned The Weather Channel was longer — it lasted from March 10, 2015  to June 24, 2019 — but cost the programmer less (about $31.5 million) according to Kagan. Byron Allen’s Entertainment Studios purchased the Weather Channel in 2018. 

In contrast, the shortest dispute was a two-day dark period for Univision Communications channels for Charter Communications customers. That dispute, between Feb. 1 and Feb. 3, 2017, cost the Spanish language programmer about $200,000 in lost affiliate fees, according to Kagan. The least costly dispute was the three-day blackout of CBS broadcast stations for Dish Network customers between Nov. 21 and Nov. 27, 2017, that cost the broadcaster about $100,000 in lost affiliate fees. 

According to Kagan, 2016 was the worst year for blackout losses, with networks missing out on about $37.4 million in carriage fees. Networks lost out on about $31.9 million in fees in 2018, according to Kagan. 

While $180 million seems like a big hit for programmers to take, it is minuscule compared to the amount distributors pay out for content. Kagan later estimated that distributors pay out about $40 billion per year to cable networks for programming. Over an eight-year period, that $180 million represents about 0.06% of the $320 billion distributors have shelled out for content. 

Blackouts have become a common occurrence during carriage negotiations over the past few years, as networks usually time the expiration of their deals around major sporting or entertainment events. Distributors, who run the risk of losing subscribers to other providers the longer the disputes last, have in recent years taken a harder-line stance against carriage-fee increases. With the advent of streaming video, programmers have even more outlets for their programming.  

Even as the number of streaming services have grown with programmers creating direct-to-consumer products like Disney Plus, Discovery Plus, Peacock and the like, Kagan said that traditional distribution continues to be important. 

“Cable-network owners risk affiliate revenue loss in hopes of producing a more favorable deal with traditional multichannel operators, which still serve more than half of the video subscription market in the U.S. and still supply billions of dollars in revenues for the cable network industry,” Kagan wrote. “Although traditional multichannel operators continue to lose subscribers over the years, cable networks will not abandon their cable, satellite and telco customers in the near term, as traditional cable is still a profitable business.”

In a study conducted during the COVID-19 pandemic, Food Network and History were the cable channels most often called “must haves" by cable subscribers, according to Beta Research.

ESPN, Discovery, Channel, CNN and National Geographic were also described as networks that must be included in a channel lineup.

ESPN was the favorite network among men by a large margin in the study. Men also said that History, CNN, Food Network, Fox News, National Geographic and AMC were their favorite.

Food Network was the favorite most cited by women. Adult females also favorited Hallmark Channel, HGTV, TLC, Lifetime ID and History.

Despite losing its live sports coverage for months, viewers said ESPN was worth $1.95 a month, most of the networks listed in the survey. Viewers said Disney Channel was worth $1.85, Nickelodeon was worth $1.83, Cartoon Network was worth $1.79, ID was worth $1.78 and Fox Sports 1 was worth $1.68.

The Beta Research Cable Subscriber study was conducted in June with a sample of 1,200 adult cable subscribers. The study measured 42 basic cable networks.

A widespread coronavirus outbreak could have a short-term negative effect on ad-supported TV, Moody’s Investors Service said Wednesday -- mainly due to a broader economic pullback -- while a longer period of quarantine could actually help viewership numbers.

So far there have been more than 120,000 reported cases of coronavirus COVID-19 worldwide, with about 4,400 deaths so far. In the U.S., about 1,000 people have tested positive for the illness, with 32 deaths.

In a research report Wednesday, Moody’s said a widespread outbreak of the coronavirus in the U.S. could have a brief negative effect on ad-supported TV, with advertising sales impacted by the scarcity of consumer goods.

“If the virus spreads widely in the US, economic contraction and short supply of consumer products and durables is likely and would last through to the end of the outbreak, which could be more than one quarter,” Moody’s SVP Neil Begley wrote in the report. “The effect on US media companies’ advertising revenue would be significant. Yet, because of the nature of the disruption, we believe the duration could be short — unlike the longer consumer-led recession during and following the 2008-2009 financial crisis.”

Begley added that cable and broadcast networks; broadcast station owners; sports leagues, teams and regional sports networks; and internet advertising companies would all be affected by a broader coronavirus outbreak. So would pay TV service providers, but to a lesser extent.

According to Moody's should the spread of the virus require more people to self-quarantine, it could have a positive effect on TV viewership.  

“Pay-TV and streaming services may benefit from higher engagement and increased subscriptions as people remain at home,” Begley wrote. “That, together with political advertising ahead of the Presidential election, may partially offset the reduction in demand for ads.”

According to Moody’s more than two-thirds of ad-spending comes from areas that are at risk to see declines due to the outbreak, including retail and auto,travel and tourism, consumer products, restaurants, and theatrical films. Less vulnerable sectors - some that actually could see increased ad spending -- include telecom, financial services, insurance, political, pharma and media and home entertainment.

Moody’s added that even if ad sales do decline, broadcasters and cable networks are partially shielded by affiliate fees they are paid by distributors. 

With the NAACP set to open its 51st annual Image Awards on Feb. 22, celebrating the achievements of people of color in the media, it’s not BET, TV One or OWN: Oprah Winfrey Network with the most nominations among networks.

It is Netflix, with 30.

Netflix, along with BET+, Bounce’s Brown Sugar and Urban Movie Channel, are leading the charge among streaming services to challenge African American-targeted cable networks for the hearts, eyeballs and dollars of viewers who are voracious for content that reflects their images and stories. In response, cable networks such as TV One, BET and OWN have doubled down on original fare in an effort to remain viable.

The result has been an unprecedented amount of quality content targeted to African-American viewers. “The streaming competition that the black networks are facing has provided additional pressure for those networks to up their content game,” Cheryl Grace, Nielsen’s senior VP of U.S. strategic community alliances and consumer engagement, said. “I think they have done that. They know that they have to compete with binge-watching on platforms that are increasingly serving up content in really large doses.”

Streaming platforms have indeed become more competitive in appealing to an African-American viewer who watches more than 50 hours of live and time-shifted television a week — more than 10 hours above the total population, according to Nielsen’s 2019 Diverse Intelligence Series (DIS) report. Netflix has generated headlines by securing top African-American producers such as Ava DuVernay and Shonda Rhimes to develop original content.

Nearly 40% of African-American viewers subscribe to Netflix, according to Nielsen, followed by Hulu at 15% and Amazon Prime Video at 14%. Further, Horowitz Research survey Focus TV & Video Content reported that 60% of African-American viewers feel that original content offered by brands like Netflix, Hulu and Amazon are more reflective of America’s diversity than shows on broadcast and cable networks.

DuVernay said Netflix over-indexes with African- American viewers, which contributes to her work’s strong performance on the platform. When They See Us drew more than 23 million viewers within its first month of release last May. “I’ve enjoyed a great amount of freedom there, so they are doing fine by me,” she said.

Other African-American-targeted streaming services are seeing increased audience numbers. Urban Movie Channel (UMC), which offers classic and original African-American targeted movies and series, has seen subscriptions for its $4.99 monthly service increase by 400% over the past 18 months, according to Brett Dismuke, UMC chief content officer. The service, the brainchild of BET founder Bob Johnson and his RLJ Entertainment, which was purchased by AMC Networks in November 2018, has benefited from AMC’s marketing and promotional muscle.

Along with original drama series like Craig Ross Jr.’s Monogamy and Stuck With You, the service offers popular shows from sister cable services WE tv and AMC such as Marriage Boot Camp: Hip Hop Edition and Growing Up Hip Hop.

Better Black Streaming

“Our mission is to stream black better,” Dismuke said. “When looking at our direct competitors, we have the most offerings of exclusive, original content. Our growth is attributable to the content that we’re providing.”

Nielsen’s Grace said the growing appeal in African-American content on streaming services has caused the industry to realize black viewers are not monolithic in their viewing choices.

The increase in streaming viewing hasn’t come at the expense of African-American targeted cable networks, she added. “If anything, we may see a spike in African-American viewership because viewers have to keep up with all of the new content.”

Indeed, OWN said its viewership grew last year as its original content continued to resonate with viewers despite the competition. The network’s relationship-themed unscripted content — OWN recently renewed Black Love, Love & Marriage: Huntsville, Black Women OWN the Conversation and Ready to Love — as well as veteran original scripted series like Queen Sugar and Greenleaf, have made OWN the most-watched cable network by African-American women.

“We are aware of the competitive marketplace, so our strategy has been more, more and more content for our viewers,” OWN president Tina Perry said. “Despite the attempts by over-the-top services to put more African-American content out there and attract that viewer, we’re still finding success.”

BET is positioned to serve African-American viewers on linear TV and streaming platforms. BET+, which launched in September, is a complement to the 41-year old BET basic cable network, which has parlayed its 2019 production deal with Tyler Perry into two scripted series, The Oval and Sistas.

BET+ general manager Devin Griffin said the programmer’s two offerings provide viewers with the best of both worlds. “For cord-cutters and cord-nevers, we are seeing the vision and plan that we laid out of BET+ being consumed as a complement to BET across a number of different vectors,” Griffin said, although he would not disclose BET+ subscriber numbers. “We really look at the various platforms where people can engage with the BET brand as being an interlocking ecosystem. BET+ is intended to help us expand the tent on what we’re able to offer in combination with linear.”

Long-running service to the African-American audience gives established linear channels the inside track as they launch streaming platforms, TV One senior vice president of programming Brigitte McCray said. She said the network’s lineup of unscripted series, including music documentary show Unsung and true-crime series Fatal Attraction, as well as its 2020 schedule of 10 original movies, will help TV One stay in the forefront of African-American viewing choices.

“There’s no doubt that our competitors at Netflix and Amazon have realized how important and rich the African-American audience is,” McCray said. “Without a doubt, it’s our space, and nobody knows and serves that audience better than us. TV One is unapologetically in the black people business, and we represent authentic voices and black storytelling through the lens of black culture.”

Crossover Content

As more shows featuring African-American leads and storylines roll out on all platforms, industry executives said such shows are also appealing to a mainstream audience. “Shows like Greenleaf, David Makes Man and even Empire have black viewers as their core constituency, but other viewers are tuning in as well because they like the storylines and the storytelling,” said Eric Deggans, National Public Radio television critic and author of Race- Baiter: How the Media Wields Dangerous Words to Divide a Nation.

Shows such as Fox’s Empire, which finished 2018 in the top 20 among both African-Americans and total viewers 18-plus, and Starz’s Power, the most-viewed premium cable show among African-Americans and second only to Game of Thrones among all viewers, prove shows with predominantly African-American casts can draw a broad audience.

“The color of this revolution in African-American television is not black, it’s green,” Power creator and executive producer Courtney Kemp said. “This content is making people money right now.”

And there’s no end in sight. With new projects coming down the line from Kemp (Power Book II: Ghost); Lena Waithe (BET’s Twenties); DuVernay (OWN’s Cherish the Day); Perry (BET’s House of Payne revival Assisted Living); Zöe Kravitz (Hulu’s High Fidelity); and Jordan Peele (Amazon’s The Hunters and HBO’s Lovecraft County), African-American audiences will have plenty more content to DVR and binge-watch for the foreseeable future.

“If you see a bunch of people running to target an audience, there must be a sense that there is enough audience there for people to grab,” Deggans said. “If there wasn’t an audience to be served, you wouldn’t see these big programmers developing so many shows targeted to black audiences.”

DuVernay said it’s a great time for an African- American producer. “There’s no longer the stigma of moving from movie to TV to music video to short-form,” she said. “We as storytellers can now do it all.”

As streaming becomes more and more the viewing norm, the content of the Netflixes, Amazons and Hulus of the world, bold and binge-friendly, is increasingly affecting the programming viewers see on cable and broadcast. Producers and networks alike know they have to create edgier, more serialized content to keep viewers attached to traditional TV and keep those legacy platforms relevant.

It’s an expensive proposition, but many feel it’s necessary for old-school TV to hold its own amidst the newer competition. Chris Long, executive producer on the new Fox drama Deputy, said what’s on Netflix and the other streamers pushes Deputy, a western procedural cop show starring Stephen Dorff, to go the extra mile.

“It’s a really competitive landscape and we want to differentiate our show,” he said, talking about unique shooting methods that give Deputy a cinematic look. “It does not look like CBS or NBC, because we want to compete with shows on Netflix or Hulu or other platforms. It absolutely affects how we shoot it.”

With multiple television giants poised to launch streaming products, including NBCUniversal’s Peacock and WarnerMedia’s HBO Max, traditional TV programmers are borrowing from their digital frenemies in other ways. They’re rethinking the number of episodes a series should have per season, and even at times episode length. Everyone, it seems, is aiming for more gripping content.

“When other platforms are creating shows that people want to watch that are really smart, well-written and well-executed, I think it ups everyone’s game,” CBS Entertainment senior executive VP, programming Thom Sherman said at the TCA Press Tour in August. “We encourage our writers to take risks and be sophisticated and have the subtle nuances you see on streaming and cable.”

Prize Possessions

Broadcast is an afterthought at major awards ceremonies, and any cable network not named HBO has to hustle to stay relevant to judges. At the 71st Primetime Emmy Awards in September, top drama was between Game of Thrones and Succession on HBO, Better Call Saul on AMC, Bodyguard and Ozark on Netflix, This Is Us on NBC, Pose on FX and Killing Eve on AMC/BBC America. Game of Thrones won.

Top comedy was between HBO’s Barry and Veep, Amazon’s Fleabag and The Marvelous Mrs. Maisel, Netflix’s Russian Doll, Pop TV’s Schitt’s Creek and NBC’s The Good Place. Fleabag got the trophy.

When the Golden Globe Awards were given out earlier this month, best drama was between HBO’s Big Little Lies and Succession, Netflix’s The Crown, AMC/BBC America’s Killing Eve and Apple TV+’s The Morning Show, with Succession winning.

Best comedy was between Netflix’s The Kominsky Method and The Politician, Amazon’s Fleabag and The Marvelous Mrs. Maisel and HBO’s Barry. Fleabag won.

Viewers watched an average of four hours and six minutes of streaming programming on Netflix and Hulu last year, according to NPD Group, up 7% from the previous year. Broadcast and cable are emulating aspects of streaming to better connect with viewers. Dramas, for one, are less procedural than they used to be, and more likely to set story arcs across a season, not an individual episode. “They might be a little more open to more serialized storytelling than 10 years ago, when it was strictly episodic,” Michelle King, executive producer of Evil on CBS, said in August.

Procedurals always played much better in syndication than serialized shows. But as the aftermarket for broadcast shows evolves, the serialized stuff does just fine on the streaming platforms where they often end up after their broadcast premieres. “Serialized programs have as much of an opportunity to pick up an audience as procedurals,” media consultant Bill Carroll said. “And audiences seem to be more attuned to watching serialized shows.”

While broadcast and basic cable must still answer to advertisers who may be unhappy about risqué content, it’s clear they are game to push the envelope. Marc Cherry, who made his name with Desperate Housewives and now produces Why Women Kill for CBS All Access, sees a “tremendous” change to the television landscape.

“There are storylines we were not allowed to do on Desperate Housewives in 2004 that you see now on broadcast TV,” he said. “We’re inching toward more provocative stuff. It’s happening.”

Carroll sees it in the 10 p.m. hour in particular. “They can’t be as edgy as HBO and Showtime and Netflix, but broadcast is as close to the edge as it can reasonably get away with,” he said.

The series may not have the antiheroes that define streaming and cable hits, but Linda Ong, chief culture officer at Civic Entertainment Group, is increasingly seeing the emotional depth that defines peak TV on broadcast. She singled out This Is Us and New Amsterdam for drama that goes deeper and darker than what broadcast is known for. “The higher-end dramas are seemingly of the same world as the prestige dramas,” she said.

Chris Long mentioned “enormous leeway” from Deputy’s producers, eOne and Fox, when it came to requesting expensive things, such as a Russian Arm mobile crane setup to shoot a car crash, that make for a better-looking show. “It’s just, step up your game — better dialogue, better action sequences,” he said. “The fact is, [streamers] spend money on their programs to a level where it’s very competitive.”

Short and Sweet

The Netflix effect is also evident in the number of episodes some series are doing on broadcast. Streamers saw they could land A-list talent with 10-episode seasons, or shorter, and other platforms are borrowing from that playbook. NBC’s celebrated comedy The Good Place had 13 episodes per season, while season four has 14. Season one of Ripley on Showtime, based on the Patricia Highsmith novels, will have eight episodes. Season two of HBO drama Big Little Lies, which began last summer, had just seven. Fox series The Moodys, which aired in December, had six.

“Actors are interested in shorter orders,” King said. “The broadcast networks have to be open to that.”

Shorter seasons make it easier to reach high quality levels from start to finish. Liz Tigelaar, executive producer/showrunner of Hulu’s Little Fires Everywhere, which premieres March 18, got her start on such broadcast series as Once and Again and American Dreams. Producing eight episodes across two years, as opposed to 22 in 10 months, makes for better product, she said. So does writing all the episodes before production begins.

“The lead time really helps you craft a better series,” Tigelaar said. “From a creative standpoint, you’re not in the rat-race assembly line of production.”

While much of traditional TV remains allegiant to traditional episode lengths to keep the programming schedule intact, there are exceptions. The season four premiere of This Is Us ran for an hour and eight minutes. The Murphy Brown premiere on CBS last year went for an hour and five minutes.

Broadcast doesn’t have much of an issue disrupting the schedule when live events go long, Linda Ong noted. “There’s much more permission in the industry to be experimental with things like this,” she said.

Stacked Up

Broadcast and cable networks are also working to allow more binge viewing of their programs. Last summer, The CW revealed it had secured in-season streaming rights to all new series going forward, the announcement coming when its deal with Netflix ended. The CW can stack each episode of a new series on its digital platform, meaning a viewer who comes to the show late can catch up in short order.

“That allows us to control our branding and bring our fans back to us,” The CW chairman and CEO Mark Pedowitz said.

When FX shows premiere in the coming weeks, the norm will be for two episodes to run on premiere night, a happy medium between bingeing and the traditional weekly release. Comedy Breeders airs two of its 10 episodes March 2, as does Better Things March 5.

“We’re going into, let’s drop two, let’s drop three,” FX Networks and FX Productions chairman John Landgraf said.

When The Moodys aired on Fox in December, its six episodes ran across three nights.

Broadcast and cable are also acknowledging the significant role the streamers play in how back episodes are watched. Promos for NBC drama Good Girls, which debuts season three Feb. 16, encourage viewers to watch seasons one and two on Netflix.

“You can’t count on everyone watching live,” said Dan Fogelman, creator/executive producer of This Is Us, which streams on Hulu after premieres. “That’s the challenge for all people doing our job — how are people consuming media?”

Modern viewers also like controlling the flow of episodes with their remote. On streaming, they don’t need the reminders and exposition that eat up storytelling time in a show on a traditional platform. ABC’s Grey’s Anatomy has built a new generation of fans among teens, thanks to having 15 seasons on Netflix. “The show is experienced differently when you watch a whole bunch of them,” said Krista Vernoff, Grey’s showrunner and executive producer.

Among FX’s other premieres coming up, a couple are premiering on Hulu, part of a new hub known as FX on Hulu. Alex Garland’s limited series Devs begins March 5 on FX on Hulu, and ’70s women’s rights drama Mrs. America begins on the streaming hub April 15. FX has not announced if the shows will also appear on linear TV.

Fargo premieres on FX April 19, and pops up on Hulu the next day. Creator/executive producer Noah Hawley spoke about delivering two versions of an episode to the network — with commercial breaks and without. “I can’t say I would miss having to put commercials in,” he said. “But those are the things I think about in approaching the medium in 2020.”

Media Networks revenue was flat at the Walt Disney Co. in its fiscal second quarter, as a 2% lift in cable revenue erased a 2% decline at its broadcast unit, the company said Wednesday.

Media Networks revenue for the period was $5.5 billion, even with the same period in the prior year. Cable networks revenue increased 2% to $3.7 billion, offsetting a 2% decline at its broadcast unit to $1.8 billion. Operating income at the Media Networks division declined 3% to $2.2 billion, as a 2% gain at the cable unit -- fueled by higher affiliate revenue at ESPN -- was not enough to counter a 29% dip at the broadcasting division.

Overall revenue was up 3% to $14.9 billion, fueled by strong gains at its Filmed Entertainment unit -- blockbuster Avengers: Endgame has taken in about $1.5 billion in worldwide box office revenue so far. Overall segment operating income was down about 10% in the period.

Net income got a big lift from the March 20 completion of Disney’s $71.3 billion purchase of certain 21st Century Fox programming assets. Net income for the period was $5.4 billion, up 85% from $2.9 billion in the prior year, and earnings per share increased 81% to $3.53 per share from $1.95 each in the previous year. Excluding one-time items -- most notably a gain of $4.9 billion connected to the doubling of its ownership of streaming service Hulu as part of the Fox deal -- and EPS would have declined 13% to $1.61 per share from $1.84 per share.

“We’re very pleased with our Q2 results and thrilled with the record-breaking success of Avengers: Endgame, which is now the second-highest grossing film of all time and will stream exclusively on Disney+ starting December 11th,” Disney chairman and CEO Robert Iger in a press release. “The positive response to our direct-to-consumer strategy has been gratifying, and the integration of the businesses we acquired from 21st Century Fox only increases our confidence in our ability to leverage decades of iconic storytelling and the powerful creative engines across the entire company to deliver an extraordinary value proposition to consumers.” 

ESPN is the most valuable cable network to cable operators, according to a survey conducted by Beta Research.

The sports network has ranked first in perceived value for 18 years in a row in the Beta study.

The average perceived value of ESPN to the cable operators was 99 cents per month. They pay substantially more for ESPN, the highest-priced national cable network.

Related: ESPN Tops Cable’s Primetime Ratings Chart for January

The No. 2 network in the survey was Fox News Channel. Operators gave it a perceived value of 85 cents, also less than most operators currently pay.

Other top networks in the survey included ESPN2, 78 cents; Disney Channel, 73 cents; NFL Network, 73 cents; Discovery Channel, 69 cents; FS1, 67 cents; Food Network, 67 cents; TNT, 67 cents; CNN, 67 cents; and USA Network, 66 cents.

Related: Disney Sees ‘Modest’ Subscriber Improvement in Fiscal Q1

Beta also asked cable operators about which network organizations were very helpful in selling TV Everywhere, HDTV and/or video on demand.

The top group named by operators with 100,000 or more subscribers was NBCUniversal Cable. Disney and ESPN Media Networks comprised No. 2, followed by Fox Cable Networks, Discovery Networks, Fox News Channel and Scripps Networks Interactive.

The Beta study is based on a national sample of 102 cable operators and was conducted between August and October of 2017.

Cable networks have scared up some original horror-themed digital projects, now streaming online in time for Halloween.

Alongside original zombie-themed series The Walking Dead — which drew 11.4 million viewers to its Oct. 22 season-eight premiere episode — AMC has also launched several new original documentaries and specials through Shudder, its horror, thriller and suspense-themed subscription streaming service.

Related: What Are We So Afraid of?

The service premiered The Core: Halloween Special on Oct. 26. It takes a behind the scenes look at the popular Halloween theatrical film franchise, Shudder general manager Linda Pan said.

Shudder, which launched in 2016, had earlier debuted its first documentary series, Primal Screen, about how people are simultaneously attracted to and repelled by what scares them the most. Shudder is also developing several scripted series expected to debut in 2018, including Riprore, which follows a brutal homicide investigation in Los Angeles that uncovers a darkness that leads to the end of days; and The Blondes, in which blonde women afflicted with an unexplained disease turn into rabid monsters at any moment.

“For us original programming is super important as part of our programming strategy,” Pan said. “We know that our target audience is interested in getting programming from creators that they know and respect, so really look to develop original programming that isn’t going to be available anywhere else for this fan base.”

BET has tapped the horror genre to launch its first digital scripted series, The Last One. The five-episode BET.com series, which fittingly debuted this month on Friday the 13th, follows four friends who meet up with a mysterious stranger after getting stranded on the road, according to network officials.

BET.com vice president of editorial Jermaine Hall said the success of horror-based content, including Jordan Peele’s breakout theatrical film Get Out, convinced the network that the horror genre was perfect to facilitate its initial play into original digital series.

“We saw with the success of Get Out, that our audiences were clamoring for that kind of content,” he said. “We really wanted to capitalize on the film and the genre’s popularity, and the script that we came up with is inherent to the black experience.”

While admitting the viewership for The Last One has been a “slow build” since its debut, Hall said he expects the numbers to increase this week with the attention given to Halloween.

The Last One, though, faces stiff competition from other streaming services offering horror-themed content heading into Halloween. Netflix this past Friday launched the second season of Emmy-nominated series Stranger Things, while Hulu has debuted the second season of its zombie-themed original horror series Freakish. Amazon on Friday, Oct. 13, launched its original anthology series Lore, based on Aaron Mahnke’s popular podcast.

Shudder’s Pan said the horror genre’s appeal — which draws in men and women across age demographics — will extend well beyond Halloween.

“Ultimately the best horror and thriller entertainment are ones that are visceral dramas that really tap into an audience’s need to be provoked and excited and to have a cathartic experience,” she said.

Analyst Michael Nathanson of MoffettNathanson Research is forecasting a bigger decline in TV advertising for 2017.

In a new report released Thursday (Aug. 24), Nathanson said he sees national and local TV ad revenue decreasing by 5.1% compared with his prior 4.1% estimate.

Nathanson said he expects the broadcast networks to drop 4%; cable nets, 2.5%; local TV stations, 9% (including political ads); local cable, 10%; and syndication, 1%.

Related: Analyst Forecasts 5% Decline in Total TV Advertising

Overall, Nathanson’s latest forecast sees U.S. advertising growing at a slower 2.5% rate, with digital increasing 18.5%.

The new forecast follows second-quarter earnings reports in which most TV companies reported lower advertising sales. Total national TV ad revenue was down 2%.

More recently major ad agency holding companies have reported lower revenue because of spending cutback by big clients.

“Simply put, traditional media and agencies in the U.S. face the same problem,” Nathanson said in a report Thursday. "They have too much client concentration in sectors like retail, consumer products and auto that are not growing budgets and not enough small-to-medium sized enterprises that continue to fuel online growth."

Read more at broadcastingcable.com.

21st Century Fox reported lower fourth-quarter profit despite gains at its cable programming operations.

Net income fell 16% to $476 million, or 26 cents a share, from $567 million, or 30 cents a share.

Revenue rose 2% to $6.75 billion in the quarter.

Earnings were a hair above Wall Street forecasts, but revenue fell short.

Operating income increased 19% to $1.44 billion at the company’s cable network programming unit. Revenue rose to $4.329 billion from $3.921 billion.

Domestic affiliate revenue rose 10% on increased rates at Fox News Channel, FX, FS1 and the regional sports networks.

Related: Fox News, ‘Game of Thrones’ Stay Hot in Weekly Cable Ratings Race

Domestic advertising revenue was up 6% because of higher ratings at Fox News and increases at National Geographic Channel.

At Fox’s television unit, which includes the Fox Broadcasting Co., fourth-quarter operating income fell by $7 million to $137 million. Revenue dropped to $137 million from $144 million.

National and local advertising was down, offsetting gains in retransmission payments. Expenses were 3% lower because of lower entertainment programming costs.

Read more at broadcastingcable.com.

INDIANAPOLIS — With the rest of the cable industry focused on the possibility of Scripps Networks combining with either Discovery Communications or Viacom, Sanford Bernstein media analyst Todd Juenger warned that one of the catalysts for a deal — preserving double-digit affiliate fee increases — won’t last too much longer for any cable programmer.

Update: Discovery to Buy Scripps Networks for $14.6 billion

Gross margins on video programming for the average cable operator are about $21 per subscriber per month, after affiliate fees and customer expenses, Juenger noted on a panel at The Independent Show here. Juenger estimated that by 2018, that gross margin would shrink to $15 per month per subscriber.

“If nothing else changes, how long is it until that $20 per subscriber per month goes to zero?” Juenger asked. “The answer is 2023.” In order to maintain profit margins, either affiliate-fee growth must slow down or networks have to be dropped, he added.

Juenger had an answer for that, too. Of the 10 network groups that control the bulk of programming and affiliate fees, he said distributors have several choices.

Weighing Net Losses
The greatest financial impact, he said, would come from dropping The Walt Disney Co.’s networks — including broadcaster ABC and ESPN, pay TV’s priciest network — as Disney charges the highest affiliate fees at $11.49 per sub, per month. But it could also prompt the greatest number of subscribers to switch providers: 43%, by Juenger’s estimate.

Dropping Discovery Communications, Scripps Networks, AMC Networks and CBS would have the smallest subscriber impact — under 10% for each network group — but also the least financial impact. All four networks combined have total fees of less than $4 per subscriber per month.

That leaves Viacom, which has affiliate fees of about $3.50 per subscriber per month and had already been dropped by Cable One, Suddenlink Communications (later restored after its purchase by Altice USA) and several smaller cable operators. Those distributors have lost video customers at a higher than average rate, at least partly attributable to shedding the Viacom channels. Cable One has shed about 20% of its video base in the past two years, compared to 2% to 3% for the rest of the industry. But Cable One was willing to sacrifice what it believed to be less profitable customers and has focused on broadband for years.

For Juenger, it’s a simple case of economics. Ultimately, it comes down to how many subscribers a distributor is willing to lose. According to Juenger’s calculations, dropping Viacom would result in losing about 15% of a distributor’s video base.

“If you can stand to lose 15% of your subscribers, you should drop Viacom,” Juenger said, adding that he wasn’t singling out the company because of some personal vendetta. “If you drop Disney, you’ll have a tougher time maintaining subscribers.

“Everybody has something to break,” he added. “This is why the networks cannot continue to harvest these big price increases. It’s no longer financially viable to carry it.”

But it is just that fear of eroding affiliate-fee growth that is pushing some networks together. Scripps Networks, which has about eight channels including HGTV, Food Network, Travel Channel and CMT, is in merger talks with Discovery Communications. That’s after Viacom dropped out of the running for Scripps, after reportedly readying an offer of $10.6 billion in cash.

The Discovery bid is expected to top $90 per share for Scripps, a 34% premium to its close on July 18, when merger talk first surfaced.

Read More: Complete Coverage of the Proposed Discovery-Scripps Merger

Fighting Scale With Scale
Merger proponents say smaller players need scale economics and added carriage for negotiating leverage. That’s because distributors have also been very active on the M&A front to give them more scale and leverage against programmers.

With big deals like Charter Communications-Time Warner Cable completed, and AT&T’s $108.7 billion purchase of Time Warner Inc. winding through the federal approval process, several other smaller deals have popped up in the past few months. TPG Capital has been particularly aggressive in the space — it snapped up RCN and Grande Communications last year for $2.25 billion, and in May agreed to purchase Wave Broadband for $2.36 billion. Cogeco Cable, the Canadian parent of Atlantic Broadband, agreed to buy Harron Communications’ MetroCast operations for $1.4 billion.

For smaller operators, the main catalyst for deals is to expand fiber and broadband networks. For many, video is becoming a second-class offering — small operators CableOne and Suddenlink Communications were the first to drop a major programmer (Viacom) in 2014.

According to a panel session at last week’s Independent Show, more deals are expected to come.

“Markets are strong across the board. We’re seeing that in the checks the private equity guys are writing,” said CoBank senior vice president Ted Koerner at a TIS session moderated by DH Capital co-founder and chairman Joe Duggan.

NBCUniversal posted a big increase in profits in the second quarter, as distribution revenue increased at its cable and broadcast TV networks.

Parent company Comcast said NBCU’s adjusted earnings before interest, taxes, depreciation and amortization rose 22.6% to $2.071 billion. Revenue increased by 17.3% to $8.331 billion.

At the NBCU cable networks, earnings rose 11.7% to $1.055 billion as revenue rose $5.1% to $2.7 billion. An 8% gain in distribution revenue offset lower ad revenue, which was down 0.9% because of lower ratings.

NBC’s broadcast operations increased profit by 5.5% to $416 million. Revenue was up 5.3% to $2.241 billion. Distribution and other revenue was up 36.1% because of higher retransmission-consent fees. Advertising revenue was down 1.2%.

Overall, Comcast’s second-quarter net income rose 24% to $2.513 billion, or 52 cents a share, from $2.028 billion, or 41 cents per share, a year ago. Revenue rose 9.8% to $21.165 billion.

At Comcast’s cable business, earnings rose 5.4% to $1.956 billion in the quarter as revenue rose 5.5% to $13.12 billion.

The MSO’s total number of video subscribers fell by 34,000. The company added 175,000 high-speed internet customers. Phone customers were down by 22,000.

Total customer relationships rose by 114,000, the company said.

Read more at broadcastingcable.com.

The summer television season is upon us, and cable networks along with video streaming services are gearing up to launch new scripted series in programming genres ranging from comedy to horror and drama.

Here’s a partial list of new original scripted series premieres from cable and digital subscription video-on-demand services from June 19 through Aug. 31.

THE PRODUCTION ISSUE > Cover Story: John Landgraf's Legion of Hits |Content: Family Business Expands Its Tool Set | Finance: Production Profits Now Power VOD Leaders | Viewpoint: What Comes After Networks? Neo-Studios | Through the Wire: ITN Plotting British Invasion Into U.S. Production Market

JUNE 19
Loch Ness
Drama (Acorn TV)

JUNE 22
The Mist
Horror/drama (Spike)

JUNE 23
GLOW
Comedy (Netflix)

Free Rein
Drama (Netflix)

JUNE 25
Hotel Transylvania: The Series
Animated (Disney Channel)

JUNE 27
Tales
Drama (BET)

JUNE 30
Gypsy
Drama (Netflix)

Little Witch Academia
Animated series (Netflix)

Danger & Eggs
Animated series (Amazon)

JULY 5
Snowfall
Drama (FX)

JULY 7
Castlevania
Animated series (Netflix)

JULY 10
Will
Drama (TNT)

JULY 11
The Bold Type
Drama (Freeform)

The Hollywood Puppet Sh!t Show
Comedy (Fuse)

American Ripper
Drama (History)

JULY 12
I’m Sorry
Comedy (TruTV)

JULY 14
Friends From College
Comedy (Netflix)

JULY 17
Loaded
Drama (AMC)

JULY 21
Raven’s Home
Comedy (Disney Channel)

Ozark
Drama (Netflix)

JULY 25
The Last Tycoon
Drama (Amazon) 

JULY 28
Room 104
Drama (HBO)

AUG. 2
Swedish Dicks
Comedy (Pop TV)

The Sinner
Drama (USA Network)

AUG. 3
What Would Diplo Do?
Comedy (Viceland)
Small Town, Big Mayor
Comedy (UPTv)

Aug. 4
Wet Hot American Summer: Ten Years Later 
Comedy (Netflix)

AUG. 9
Mr. Mercedes
Drama (Audience Network)

AUG. 13
Get Shorty
Comedy (Epix)

AUG. 18
Marvel’s The Defenders
Drama (Netflix)

AUG. 24
There’s … Johnny!
Comedy (Seeso)

AUG. 25
Disjointed
Comedy (Netflix)

The Tick
Comedy (Amazon)

TV production, long hoped to be the antidote for falling ratings and affiliate fees at cable networks, is expected to grow strongly in the next several years, fueled by an unlikely ally — subscription video-on-demand providers.

SVOD companies such as Netflix, Amazon and Hulu are expected to significantly increase their spending on content this year. According to Morgan Stanley media analyst Ben Swinburne, SVOD firms will spend $15 billion in 2017, up from less than $4 billion in 2012 and led by Netflix ($6 billion), Amazon ($4 billion) and Hulu ($3 billion).

THE PRODUCTION ISSUE > Cover Story: John Landgraf's Legion of Hits | Content: Family Business Expands Its Tool Set | Viewpoint: What Comes After Networks? Neo-Studios | Through the Wire: ITN Plotting British Invasion Into U.S. Production Market

TV production revenue is a welcome addition as affiliate fees and advertising revenue continues to be under pressure, Telsey Advisory Group media analyst Tom Eagan said. “The better media companies are able to harness studio production.”

TV production has long been the decidedly less glamorous cousin of overall studio revenue, Eagan said. But in recent years, as movie budgets have escalated and box-office receipts have dwindled, TV production has gained in stature and sales.

The big content providers rarely break out specific numbers for TV production, but most said it has become a significant, and growing, part of the overall revenue haul.

Supply for Demand
Fueling that growth is the nearly insatiable appetite of broadcast, cable and now SVOD distributors, for scripted programming. Most programmers are clamoring to meet the demand.

In May, AMC Networks announced a deal with Charter Communications where it would develop and co-produce exclusive content for the cable operator within a specific window.

At its first-quarter earnings conference call shortly after the deal was announced, AMC Networks CEO Josh Sapan said he wasn’t sure whether that deal would lead to others like it, but added that it allows for the expansion of its AMC Studios operation.

Sapan has long been a proponent of owning the content the company’s networks air — AMC Studios produces several shows for its networks including The Walking Dead, Turn: Washington’s Spies and Fear the Walking Dead. But AMC is now seeing the studio as a source of revenue for shows outside of its networks.

“It’s a significantly growing part of our top line, and so we think that being a studio and TV producer will make us important for this ecosystem domestically, both satellite, cable, telco and emerging [multichannel video programming distributors],” Sapan said on AMC’s first-quarter earnings call in May.

Others are seeing the light too. Viacom CEO Bob Bakish touted his Paramount TV Studios deal with Netflix for the show 13 Reasons Why, which has become a social media phenomenon.

Viacom launched its Paramount Television production unit in 2014 and has already exceeded its target of one drama and two comedies on-air within three years. The studio is in production for season two of Berlin Station (Epix) and Shooter (USA Network) and for season three of School of Rock (Nickelodeon) and season three and four for Bajillion Dollar Propertie$ (Seeso). It also is currently in production on The Alienist for TNT and Tom Clancy’s Jack Ryan for Amazon. In the summer, shooting begins for Netflix series Maniac and in the fall for Netflix’s The Hunting.

“Having a successful TV production business attached to the studio provides helpful consistency in cash flows, and I believe it is fundamental to the success of the studio,” Bakish said on the call. “And let’s not forget that this is a low capital-intensive business. We see considerable value here going forward.”

The Price for Rights
In a recent research note, Swinburne pointed to Hulu’s purchase of streaming rights with NBC for the 20th Century Fox Television-produced hit This is Us for an estimated record $2 million to $4 million per episode as a sign of the changing times. That deal, he wrote, “highlights the new reality that the largest syndication dollars are now from SVOD, dwarfing what TV networks/stations are paying.”

Netflix, for example, paid an estimated $1.75 million per episode for Gotham and $2 million per episode for The Blacklist in 2014, records at the time.

“For TV studios, digital dollars now dwarf TV pennies,” Swinburne wrote, adding that combined licensing fees for digital and traditional platforms for syndicated shows is now in the $2 million-per-episode range, at or slightly ahead of historical levels.

But traditional TV’s portion of that average is dwindling. Recent off-network syndication deals for Brooklyn Nine-Nine ($500,000 per episode to TBS) and Black-ish ($800,000 per episode to FX and BET) are a fraction of what they were in the past. For example, TNT purchased Hawaii Five-0 from CBS in 2011 for $2 million per episode.

Broadcast networks plan to air more than 100 scripted series next season, Swinburne noted, and the studios behind those shows will most likely generate more revenue from back-end licensing from SVOD companies than from TV networks.

Eagan isn’t so sure that SVOD licensing will surpass TV network revenue, but said it could be close.

“While we saw viewership and ad dollar substitution for licensing, I don’t think you’ll see the same kind of substitution here,” Eagan said. “It’s probably net-net, but it’s still additive. Is it additive for the company itself? Probably yes.”

HBO, Showtime and Starz are merely using Amazon Channels as an intermediary to reach viewers, substituting for the role played by conventional multichannel video programming distributors rather than providing true "direct-to-consumer" services, according to a new research note from BTIG Research's media/cable analyst Richard Greenfield.

He calculated that half of HBO Now subscribers and 75% of Starz viewers watch those networks' shows via Amazon Channels, a service for Amazon Prime members, while "the vast majority" of Showtime online viewers come in via Hulu add-ons, he said.

These factors auger early signs that virtual MVPDs "are cannibalizing" traditional cable, satellite and telco TV operators -- an “elephant in the room” topic that "nobody talked about at the 2017 TV Upfronts," Greenfield said.

At the same time, the ease of cancelling vMVPD accounts should make investors cautious about "who is in/out of each bundle" since subscribers don't need to commit to a full year at any time.

Amazon, Netflix, Hulu and over-the-top video factors constitute six of the "baker's dozen" topics in Greenfield's June "media thoughts."

"Direct-to-consumer has failed for cable networks," Greenfield said, refuting network programmers who "talk about their direct-to-consumer strategy and focus on their early success stories. "DTC is really just new, wholesale relationships. ... While it is phenomenal that premium channels such as HBO, Showtime and Starz are adding paying subscribers, they are not building a direct-to-consumer relationship."

He also pointed out that Amazon itself is a program producer. It can use its massive data analysis to monitor the choices of premium network customers and use that intelligence to commission its own, competitive programming.

In other OTT analyses, Greenfield compared the "bandwidth disparity" in usage of Netflix vis-à-vis Amazon and Hulu, noting that, "despite increased competition, Netflix’s ability to identify and either license or produce 'buzzworthy' content appears far better than its peers'."

He said he expects that Hulu's 2018 plan to revamp its next-day-delivery of ABC, Fox and NBC shows (for a higher fee) will convert Hulu into a "direct copy of Netflix and Amazon Prime Video," offering a combination of original programming and archived broadcast network shows.

Live and Cheap
Another new Amazon initiative -- which surfaced after BTIG published its June report -- could further appeal to cord-cutters seeking to reduce their media bills. The Greenfield analysis came within days of Amazon's announcement that it will offer Prime subscriptions for about half price (roughly $6 per month) to low-income customers, such as families who receive public assistance. That plan was greeted by an array of opinions, seen by some as an effort to move beyond mid- and upscale customers into the "Walmart shoppers" category -- many of whom may want to reduce their cable expenses.

Greenfield said cord-cutters are "embracing vMVPDs" with expectations they bring from the "legacy MVPD ecosystem." In particular, viewers expect live, real-time programming and easy-to-access program guides. As vMVPDs grow, "the majority of subscribers are going to be coming from the legacy MVPD ecosystem and they will want live TV surfaced faster, not to mention a traditional program guide such as Sling just added."

Greenfield's latest commentary reiterates a point he made in April, when he emphasized that Amazon's growing subscription relationships give it advantages that "legacy media executives need to pay attention to." At that time, he cited Amazon's chief financial officer Brian Olsavsky, who observed that the "volatility" in Amazon Prime activity was coming from the growth in digital video and music, and other digital services.

Greenfield concluded his current analysis by citing the power of Amazon's brand plus its "deep pockets, willingness to think longer-term than most other companies and incredible consumer data." Acknowledging that Amazon has stumbled in its early attempts to enter some categories, he warned that the company is "capable of iterating until they succeed."

Overall TV revenue should decline by about 4% over the next five years, due mainly to the descent of home video sales, but cable and internet video companies should enjoy healthy gains into the next decade, according to PricewaterhouseCoopers.

In its much-anticipated Global Entertainment and Media Outlook 2017-2021, PwC believes that overall TV revenue will fall from $109.04 billion in 2016 to $105.04 billion by 2021. That decline is due almost entirely to the fall-off of home video sales, which PwC sees declining at a 13.4% annual clip through 2021.

Subscription TV, which just went through its worst first quarter ever – declining by about 762,000 subs in the period – is expected to show a slight gain to $101.1 billion in 2021 from $100.9 billion in 2016. Driving that increase is the steadying of subscriber losses in cable to about 0.1% annually from 2017-2021, compared to 2% in 2015 and 1% in 2016.

While cable’s unique broadband infrastructure is expected to keep subscriber losses at a minimum over the next five years, PwC also sees a similar advantage for cable networks. According to PwC, cable ad revenue is expected to grow by 15.6% between 2017 and 2021, from $21.8 to $25.2 billion, while broadcast ad revenue should grow by 5% to $18.9 billion from $18.0 billion.

Related: TV’s Wild New Frontier [subscription required]

In an interview, PwC US Technology, Media and Telecommunications Leader Mark McCaffrey said the ability to target ads is going to play a huge role in cable’s ability to attract ad revenue.

“They’re banking on the fact that the content will attract more viewers and that will create more opportunities for the advertisers,” McCaffrey said. “When you look at analytics and being able to align more [with] who is watching what program and the social end of it that will attract more advertising dollars.”

Internet video is expected to be the biggest beneficiary of targeting, and PwC expects near exponential growth from that sector over the next five years. According to PwC, subscription video on demand revenue is expected to rise 71% from $8.2 billion in 2016 to $14.03 billion in 2021.

While Netflix continues to dominate that space, McCaffrey said other newer entrants will also play a role.

But the PwC exec said any success will come down to how well operators and programmers serve the user.

“We’re facing the day of the user,” McCaffrey said, adding that is who will determine the ultimate direction the industry will take. “The trick is going to be to use technology to create that relationship with the user so you know where their tipping points are on certain items and you can react to it, knowing that even that same user’s views may change next month.”

It is a brave new world for television. As more consumers embrace cord-cutting, cord-shaving and skinny bundles, multichannel video programming distributors have started to gain the upper hand in negotiations with the big cable networks. It’s time for those cable channels that have been riding on the coattails of their big-brand parent companies to face the music.

Distributors are no longer being forced to take on smaller, low-rated channels to appease the Viacoms or Disneys of the world. They are no longer interested in having six MTV channels when all they want is the original-flavor MTV. They can pass on having eight Nickelodeon channels when the original Nickelodeon will do. One thing that’s been said – and bears repeating – is that distributors are looking for something non-duplicative. Having 16 music channels is clearly overkill. And being forced to take MTV Tres in order to get MTV is tantamount to being held at gunpoint.

Related: Viacom’s Bakish Touts Skinny Bundles

Earlier this year, we saw reports that Viacom is planning to narrow its focus to six key channel brands – Nickelodeon, Nick Jr., MTV, Comedy Central, BET and Spike – while shifting away from smaller brands like CMT and TV Land. What message does that send to MVPDs? Are Viacom’s other brands still viable?

We’re at a day of reckoning for the large media conglomerates who have relied on the successes of their popular networks to protect their smaller, less appealing networks. They no longer have the leverage needed to force distributors to buy their large bundles of networks. For the first time, these smaller networks must stand on their own and step out from under their parent company’s protective wings.

Before, a distributor trying to get subscribers couldn’t afford not to have the key brands like MTV, CNN, Nickelodeon, etc., so they bit the bullet and loaded up on their other channels too. That’s no longer the case. With so many other choices for entertainment, the power balance has shifted, and the MVPDs now have the upper hand. In the age of the skinny bundle, distributors are free to ignore the privileged, spoiled kids and focus on the scrappy, punk upstarts that offer the kind of content their subscribers are interested in.

The current opinion is that independent channels are in danger, that they will get lost in favor of skinny bundles. This is not necessarily true. As skinny bundles are introduced, the smaller networks that had previously secured carriage via larger network leverage will no longer have the luxury of being safe within a larger network group. Instead, the playing field has been leveled for all smaller nets – the independents and those under a larger corporate umbrella.

MVPDs should not be pressured into buying smaller nets if they want the larger nets under that same umbrella. All networks should – and soon will – prove the value of what they represent as a network. Unraveling these large network bundles into smaller, skinnier bundles will allow the independent cable network a chance to shine. In this new, free market, the indie doesn’t have to worry about competing against the smaller net that relies on its parent company. The indie can stand up against that smaller net on its own and, if the indie’s product is appealing, the indie will survive.

This unbundling is causing the smaller nets that previously had the support of their parent companies to step up their game. If they were only surviving because of their parents, they might not be long for this world. Meanwhile, the independent cable networks have been on their own and made it work. They’re at an advantage. Before, independent networks had been unable to secure as much distribution as possible simply because many of these smaller channels were taking up space. If these smaller channels go away, wouldn’t there be more opportunity for independent networks to begin to gain distribution? The demise of the smaller networks within the conglomerate portfolio could be more beneficial for independent nets.

In the past year, we’ve seen ABC Family and VH1 Classic become Freeform and MTV Classic, respectively, and go down in viewer ratings. This February, NBCUniversal announced that it would be reformatting Oxygen network with true-crime programming geared toward women. After getting dropped by AT&T’s DirecTV and U-Verse, NBCUniversal announced that it will shutter Esquire Network and relaunch it as a digital-only platform. We’ve seen ESPN2’s 19% ratings dip for parent company Disney. Syfy is down 30% for parent company NBCUniversal. USA (NBCUniversal), TNT (Turner), Discovery (Discovery Communications), History (A&E Networks), AMC (AMC Networks) and FX (Fox Entertainment Group) were all down year-to-year in viewers as well.

There are some smaller networks that have been able to grow their ratings under their parent companies: SundanceTV (AMC Networks), Logo (Viacom), Bravo (NBCUniversal), OWN (Discovery) and El Rey (Univision); but overall, ratings have been in decline. It’s a tough market.

The smaller, independent networks that never had the support of a larger parent company are already used to fighting tooth and nail to support and promote their content. They’ve always had to prove themselves. That is why you see ratings growth for indie networks like Hallmark Channel, DIY, Ovation and WGN America. If you have a product worth watching, people will show up.

Not every independent network has been so lucky. We saw what happened to Participant Media’s Pivot TV last year. While some said that Pivot was the first casualty of skinny bundling, others say that it was too niche to survive, bundling or not. If your content is not in demand, should you survive? If you don’t have a big parent company, probably not. Now, in the age of cord-cutting and cord-shaving, if you do have a big parent company, you might not either.

Liz Janneman is executive vice president, network strategy, at Ovation TV. Image by Gearstd, iStock/Getty Images.

Viacom has seemingly taken the first meaningful move to break up its huge programming bundle, an action pay TV providers have been dreaming of for decades.

But while a newfound focus on six core brands might eventually unshackle distributors from being forced to pay for channels their customers don’t watch, Viacom must navigate a fine line between legacy pay TV providers and emerging virtual multichannel video programming distributors (vMVPDs) for the transition to be a success.

CEO Bob Bakish said Viacom will focus on a so-called “Flagship Six” of BET, Comedy Central, MTV, Nickelodeon, Nick Jr. and Paramount. Spike TV will be rebranded as The Paramount Network in 2018. Four other brands — VH1, CMT, Logo and TV Land — have been designated as “reinforcing” networks, flanking the core six.

Viacom’s remaining 15 networks, including the likes of MTV Classic, Nicktoons and Centric, will receive less emphasis.

Bakish has stressed that the channels will not disappear. But they won’t receive the same resources as the core six.

Most analysts believe the non-core channels will eventually go away.

Programmers like Viacom and NBCUniversal — which recently shuttered its Cloo and Esquire networks — are coming to the realization that the days of reaping additional affiliate fees and ad revenue with marginal channels of essentially repurposed content are over. In the current skinny-bundle universe, less is indeed more.

Emerging virtual MVPDs, actively targeting Viacom’s core millennial audience, will play a role in the changes. Bakish said a key part of his five-point turnaround plan for Viacom will be better managing those relationships, limiting deals with over-the-top providers to its library content while supporting vMVPDs like Sling TV and DirecTV Now by embracing “their roles as catalysts of innovation.”

But Bakish also expressed a desire to deepen relationships with existing MVPDs, a move MoffettNathanson senior research analyst Michael Nathanson saw as perhaps a path to more sensible negotiations in the future. “Maybe we will also see an end to the jamming of commercial loads and SVOD deals simply to make quarterly numbers,” Nathanson wrote.

Viacom will have to carefully waIk the line between legacy MVPDs and emerging virtual MVPDs, according to one analyst.

“By creating effectively a two-tier system for its networks and potentially allowing for a smaller set to be carried on vMVPDs like Hulu puts legacy distributors at an effective disadvantage,” Barclays media analyst Kannan Venkateshwar wrote in a client note.

But the impact may be lessened, depending on how the programmer handles its “reinforcing” networks.

Credit Suisse media analyst Omar Sheikh estimated that the four reinforcing networks contribute about 15% of total revenue and cash flow, meaning that absent the other channels, Viacom would only have to grow its top 10 networks by 3.5% annually to deliver the same profit.

Viacom has some time to pull it off. The company doesn’t have any big affiliate fee renewals until fiscal year 2018, which could give it nine more months to work out the kinks, noted Telsey Advisory Group media analyst Tom Eagan.

“The question is whether Viacom can enhance the value of its brands (in ratings and engagement) before the next round of renewals,” Eagan said in a research note.

Despite headwinds from cord-cutting and cord shaving that helped drive total multichannel video households down about 2%, advertising and affiliate fee revenue remained steady in 2015, according to SNL Kagan, an offering of S&P Global Market Intelligence.

In its Economics of Basic Cable Networks, a 786-page comprehensive network-by-network analysis of the cable industry, total revenue rose 5.3% to $63.63 billion in 2015, driven by a nearly 2% increase in advertising revenue to $28.28 billion and a 7.5% hike in affiliate fee revenue to $37.58 billion.

According to Kagan, total multichannel TV households are declining about 2% per year. On the viewership side, cable news networks like Fox News Channel, CNN and MSNBC are growing ratings while there is some erosion at general entertainment networks.  Sports channels dominated license fees, according to Kagan, while consolidation has given some distributors more leverage in carriage negotiations. On the advertising front, Kagan said the market is eagerly awaiting Nielsen’s “Total Audience” ratings to fully monetize viewership across devices. In the meantime, some networks are experimenting with reduced ad-loads.

History and A&E networks were the favorite cable networks for non-fiction producers to work with, according to a new survey from the Nonfiction Producers Association (NPA) released Tuesday.

The survey, which polled both NPA members and non-members from 41 production companies, tallied results from six production indicators, including preferences for pitching, executive creativity, development process, business affairs process, production editorial oversight, and production management, according to the NPA.

History and A&E topped the chart in most of the categories, while Discovery Channel, Lifetime, ID, HGTV or Travel ranked most often in third and fourth place across the categories, according to the organization.  

While the NPA said that factors such as volume of programming offered could have skewed the results more favorably to the top networks in the survey, he added that overall the survey was designed to help better the relationship between producers and networks.

“For many months, the NPA has been meeting with individual networks to further the producer-network dialog and suggest ways to improve processes,” said Ford. “This survey, which is part of that effort, is meant to be a snapshot, from a producer’s point of view, of their current business climate, and we intentionally kept it contained to the six basic areas they say most influence the production experience.

Despite continued declines in the pay TV sector, programmers continued to report strong affiliate-fee increases in the third quarter. The results indicate that live, on-demand and other programming offerings may still have value, but skeptics said programmers are in for a big surprise as old deals roll off.

Content providers for the most part have been losing an average of about 2% of their subscribers in the past several quarters. The losses mainly reflect a growing shift away from traditional television viewing to over-the-top and mobile services such as AT&T’s upcoming DirecTV Now, slated for a mid-November launch, and more-established services like Sony’s PlayStation Vue, Amazon Video and Hulu Plus.

RATINGS SHRINK, FEES GROW

But while fewer subscribers has led to lower ratings and slower ad-revenue growth for most of the major programmers, affiliate fees continue to climb.

While that may just be a factor of different license renewal cycles and higher pricing, it could also mean that the traditional, linear pay TV network has more value than some critics think.

For programmers, the litmus test may be 21st Century Fox, which expects between 15% and 20% of its programming footprint to come up for renewal by the end of the year. 21st Century Fox, parent of the Fox broadcast network and news and entertainment programmers such as Fox News Channel, Fox Business Network and FX, reported an 8% increase in affiliate fees in the fiscal first quarter, up from a 6% increase in fiscal Q4. And the company said that it expects affiliate revenue to continue to grow at that pace or higher as new deals come online.

What intrigued some analysts, though, is that Fox claimed the increased affiliate fees didn’t come from higher pricing, but from greater volume. Fox channels actually added subscribers in the fiscal first quarter, bucking the recent trend.

Fox attributed the subscriber increases to the movement of networks like FX, movie channel FXM and sports network FS2 into broader bundles and new deals with over-the-top distributors.

Fox already has deals with Sling TV, PlayStation Vue, Amazon Fire TV, Apple TV and is reportedly close to finalizing an agreement to be included in DirecTV Now. The programmer, a partner in the online video service Hulu with Comcast’s NBCUniversal and The Walt Disney Co., will also appear in that company’s live streaming service expected early next year.

On a conference call with analysts to discuss its earnings results last week, Fox CEO James Murdoch said that while some of the upcoming Fox News renewals are for older contracts that could see a hefty price increase to align them with other distributors, “the channel is as strong as ever.”

“We feel that the product has enormous amount of value to customers and that’s reflected in its ability to and our ability to continually grow those affiliate fees,” Murdoch said on the call.

It may be a little early to call this a new trend, MoffettNathanson senior research analyst Michael Nathanson wrote in a client note. But he added the Fox difference could be tied to its programming mix — live sports on the Fox network, sports channels like FS1, FS2 and regional sports channels, as well as general-entertainment programming on FX, FXX and Fox.

“We continue to believe that owners of must-have, live, scaled content (like Fox) have pricing power despite the consolidation of the MVPD industry,” Nathanson wrote.

Fox still needs to prove it can grow affiliate fees in the latter half of the year and show some non-programming related cost discipline at its cable networks, according to Nathanson. “The first quarter is a good start in the right direction,” Nathanson wrote.

FOX AN OUTLIER?

Telsey Advisory Group media analyst Tom Eagan attributed most of the Fox subscriber gain to its “emerging networks” like FS2. He added that other programmers probably won’t see the same result because they don’t have as many emerging networks.

Barclays media analyst Kannan Venkateshwar agreed. In a note to clients, he said the growth was due to newer channels like FXM, Fox Business and FS2 getting broader distribution.

“[I]t is not clear how sustainable this trend is given these are likely noncore networks, especially in a skinny bundle world,” Venkateshwar wrote.

Still, Eagan said he believes the next renewal cycle will be difficult for programmers, as distributors point to lower ratings and declining subscribers to push for lower fees.

“For the more independent networks, it’s going to be more challenging,” Eagan said.

HBO’s fantasy drama Game of Thrones is the most watched entertainment-based series on cable so far this summer (through Aug. 7) on a Nielsen live-plus-7-day basis counting average total viewers, per the ratings company.

The sixth season of the fantasy series bested a trio of TNT scripted shows — Major Crimes, Rizzoli & Isles and The Last Ship, according to Nielsen.

For networks, the 2016 presidential campaign was a huge summertime draw for the cable news channels. Fox News Channel, CNN and MSNBC all ranked among the top 10 most watched networks in live-plus-7-day primetime ratings for the summer among total viewers through Aug. 7, according to Nielsen.

Fox News is poised to finish as the most watched network on cable this summer and the only network to average more than 2 million viewers for the period.

The news networks were the only cable channels among the top 10 that garnered a year-to-year viewership gain. Of the seven remaining channels, five posted double-digit declines, Nielsen reported.

Download a PDF of Cable's Summer Ratings Charts.

Summer’s Top 10 Cable Entertainment Series *

SHOW                                                  NETWORK                              TOTAL VIEWERS

Game of Thrones                                     HBO                                         11.5 million

Major Crimes                                           TNT                                             6.5 million

Rizzoli & Isles                                           TNT                                             6.4 million

The Last Ship                                           TNT                                           3.9 million

Alaskan Bush People                       Discovery Channel                      3.9 million

The Haves and the Have Nots              OWN                                              3.6 million

WWE Monday Night Raw                    USA Network                                3.5 million

Love & Hip Hop Atlanta                         Vh1                                             3.5 million

Suits                                                USA Network                                    3.4 million

Street Outlaws                             Discovery Channel                              3.3 million

Summer’s 10 Most Watched Cable Networks *

NETWORK                                        SUMMER 2016                       SUMMER 2015         % CHANGE

Fox News Channel                          2.4 million                                       1.9 million                     +28%

TNT                                                   1.6 million                                        2.0 million                      -17%

USA                                                  1.6 million                                         1.9 million                     -14%

HGTV                                               1.6 million                                         1.6 million                       -2%

Discovery Channel                        1.4 million                                        1.7 million                        -18%

Disney Channel                           1.3 million                                          1.8 million                          -26%

History                                           1.3 million                                        1.5 million                           -10%

TBS                                                 1.3 million                                      1.4 million                             -5%

CNN                                                1.3 million                                        596,000                            +122%

MSN BC                                          1.2 million                                     627,000                                +91%

Pay TV subscriber rolls continued to dwindle in the seasonally weak second quarter, as losses from telco-TV service providers continued to weigh heavily on the sector.

Meanwhile, continued improvements by cable operators and declines at content providers suggest a widening gap between cord-cutters and cord-shavers.

The pay TV industry lost 757,000 basic video subscribers in the second quarter, an increase from the 683,000 it lost in the same period last year, according to MoffettNathanson principal and senior analyst Craig Moffett. Including estimates from Dish Network’s Sling TV over-the-top service, the sector lost 708,000 subscribers in 2016 and 613,000 customers in 2015.

Cable continued to temper its customer declines: It shed 242,000 video customers in the period, nearly half the 404,000 it lost in the prior year. But telco-TV losses increased exponentially at 526,000 for the quarter, compared to a gain of 5,000 in the prior year.

Satellite-TV providers continued on their roller coaster ride, adding 12,000 in the period compared to a loss of 284,000 in the prior year. Exactly where those customers are going is a little murkier. There has generally been a straight line from multichannel video programming distributor (MVPD) losses to cord-cutting, but that path has become a little less clear over the past several quarters.

The Walt Disney Co. has shed more than 4 million subscribers over the past year, while content companies such as Discovery Communications and Time Warner Inc. have estimated subscriber losses of about 2%. Those figures are based on Nielsen data that doesn’t take into account over-the-top distributors (which could number about 800,000 subscribers via Moffett’s estimates) and skinny bundles from traditional and non-traditional sources.

“[H]ere’s what we do know. Cable is doing well. The telcos are doing badly. And satellite is mixed,” Moffett wrote in a note to clients.

BTIG media analyst Rich Greenfield, who has for years warned that OTT services are a real threat to the traditional MVPD subscriber base, sees the Q2 results as more evidence that the traditional pay TV model is eroding.

Though he doesn’t expect a wholesale collapse anytime soon, Greenfield wrote in a blog post that he sees the pay TV model getting slowly chipped away.

“Just a few years ago, the industry was adding video subs at a 1-2% rate; now the industry is losing 2% through cutting/shaving, not to mention the growing pressure from cord-nevers,” he wrote. Data suggests annual losses of 3, 4 or even 5% could become reality in the next few years, he added.

“It may not happen, but it certainly feels like the big TV bundle is becoming less and less important to consumers, given a poor price/value equation,” he wrote.

Moffett said telco TV’s erosion is due partly to the “perfect storm” of a strike at Verizon Communications, Frontier Communications’s initial problems in transitioning former Fios TV markets it bought earlier this year and AT&T’s conversion of U-verse TV subscribers to DirecTV.

Even considering those developments, telco TV’s reversal of fortune is extraordinary. Moffett noted that telco TV subscriptions have gone from a 6.1% increase to a 9.1% decline in just one year.

Cable operators continued to build on the momentum of past quarters. Comcast improved its video losses in Q2 to just 4,000 (compared to a loss of 69,000 in the prior year — its best second quarter in more than a decade), while Charter Communications lost 152,000 video customers in the period, better than the 170,000 it shed in Q2 2015. Cablevision, now part of Altice USA, lost just 2,000 subscribers for its best Q2 in four years.

“Can cable’s relative position get any better?” Morgan Stanley media analyst Ben Swinburne asked in a note to clients. He pointed to Charter’s improvements, adding that more are expected.

“[W]e think Charter’s best market share days remain ahead of it,” Swinburne wrote.

Pivotal Research Group CEO and senior media & communications analyst Jeff Wlodarczak said he believes cable’s momentum will continue at the expense of the telcos. “In the end, cable simply has a better mousetrap, which will become even more apparent in ’17 when cable inexpensively upgrades its network for DOCSIS 3.1 and its 1 [Gigabit-per-second]-plus potential download speeds,” he wrote in a note to clients.

21st Century Fox reported higher net income for its fiscal fourth quarter.

Net income rose to $567 million, or 30 cents a share, from $87 million, or 6 cents a share, a year ago, when the company had costs associated with the sale of Sky and Endemol Shine Group. Segment operating income was $1.45 billion, compared with $1.54 billion last year.

Revenue rose 7% to $6.65 billion.

"We delivered full-year revenue and earnings growth on the strength of gains in affiliate and advertising revenues despite considerable foreign exchange headwinds and difficult film comparisons," said executive chairmen Rupert and Lachlan Murdoch.

21st Century Fox's cable network programming segment reported flat operating income in the quarter despite a 10% increase in revenue. Revenue was up 10%, but expenses rose 15% as sports programming costs went up and political coverage costs increased at Fox News Channel.

Read more at broadcastingcable.com.

After a weekend of high-profile, television-themed news coming out of the Comic-Con International convention in San Diego, the Television Critics Association picks up the baton beginning today in Beverly Hills, Calif., with two weeks worth of big television news and developments.

Comic-Con over the years has seen its influence within the television industry expand significantly. Once considered a must-attend show for networks with comic book or sci-fi themed shows, this past convention saw numerous cable and broadcast networks offer the nearly 150,000 attendees a look at their upcoming programming.

Several networks used last weekend’s Comic-Con event to announce the final seasons for marquee TV shows, including MTV’s Teen Wolf, CW’s Vampire Diaries and A&E’s Bates Motel -- all to heartbroken fans -- and as a launch pad for exciting new show trailers.

The TCA Summer Tour provides the networks with the opportunity to engage with both the industry and viewers about their big programming plans as more than 200 TV journalists and bloggers assemble at the Beverly Hilton.

With more than 400 scripted series and more than twice as many reality shows airing on broadcast, cable and online, network executives say getting the message out about a new show or discussing a character or plot change in a veteran series has become more difficult amid the noisy din of on-air commercials and social media chatter.

The summer boob-tube news tour continues in earnest today at TCA with a full day of Netflix presentations, and PBS and the cable and broadcast networks on deck.

Cable networks are preparing tributes to R&B music icon Prince, who died suddenly Thursday afternoon (April 21).

The multiple Grammy-winning performer died  in Minneapolis at age 57, according to CNN and other news outlets, shocking the music and entertainment world.

RELATED:Prince Tribute Specials Continue To Pour In | MTV Acknowledges Prince's Passing During Upfront

Fans and celebrities immediately took to social media to post tributes for Prince, and President Barack Obama joined in the mourning, issuing a statement soon after the news broke.

"Today, the world lost a creative icon," the president said. "Michelle and I join millions of fans from around the world in mourning the sudden death of Prince. Few artists have influenced the sound and trajectory of popular music more distinctly, or touched quite so many people with their talent. As one of the most gifted and prolific musicians of our time, Prince did it all. Funk. R&B. Rock and roll. He was a virtuoso instrumentalist, a brilliant bandleader, and an electrifying performer.

"'A strong spirit transcends rules,' Prince once said -- and nobody's spirit was stronger, bolder, or more creative," President Obama continued. "Our thoughts and prayers are with his family, his band and all who loved him.”

Several cable networks also released statements on the his passing. BET released a statement saying the news “weighs heavily on our hearts,” adding that he was a “musical prodigy, a beautiful spirit and fashion provocateur who influenced American culture.” BET Chair and CEO Debra Lee took to Twitter, writing, "Saddened by the death of @Prince, a dear friend of mine & entire @BET family. Rest in Power, Purple King. #RIPPrince”

BET founder Robert L. Johnson also paid homage to Prince: "I will miss his idiosyncratic and quirky ways which fascinated me during the times we met when I was running BET, and of course his indelible imprint on the world of music. Purple Rain is falling all over the world today!"

MTV, which plans to refer to Prince’s death during its upfront presentation Thursday afternoon in New York and was airing the performer's music videos all afternoon, said in a statement it is “heartbroken and in utter disbelief at the news that the world has lost Prince Rogers Nelson so suddenly and so before his time."

"Prince was a once-in-a-lifetime artist who transcended every medium and genre he touched and created music with a passion and individuality that inspired multiple generations," the network said. "Our hearts and prayers go out to his family, friends and millions of fans."

John Eggerton also contributed to this story.

When President Obama sets foot in Cuba this week — the first U.S. president to do so in 88 years — it will signal a change in relations between the two countries that will extend way beyond opening the island nation as a tourism destination.

The barrier is crumbling between the U.S. and one of its closest geographical neighbors. We stand at the brink of a new era in which airlines, banks and manufacturers stand shoulder to shoulder with telecommunications companies, program providers and technology innovators to open a new and different age in commerce and human relationships with our Caribbean neighbor.

I can say, from first-hand experience, that our company’s relationship with Cuba, its people and its home broadcaster has been a journey of surprises and delights. Cuba’s people want to retain their identity and I can’t think of a more important way to share their unique cultural values than to reveal their art, literature, music and sports via TV programming to the United States.

Throughout recent history, whenever a seismic shift occurs in our relationships around the world, the cable television industry has been a major player, communicating the spirit of celebration by giving voice and personality revealing an untold side for a segment of the world’s population.

We are invited to watch from our living room sofas here in the U.S. as change happens. This year, cable TV again has the opportunity to observe and uncover the emerging dialog between our two countries. I can’t think of any industry that is more powerful in provoking our nation’s curiosity in the world around us, or in opening our eyes and our hearts to it.

With President Obama’s historic island visit, the cable industry has the opportunity again to be a part of a vibrant new dialog, delivering to U.S. citizens the untold story of life in Cuba. I don’t know about you, but I can’t wait.

Lilian Samata is chief operating officer of CubaNetwork, a multi-platform and linear channel delivering original Cuban programming in both English and Spanish.

Image of Havana used under Creative Commons Attribution ShareAlike 3.0 Germany

The year 2015 will go down as a championship campaign, ratings-wise, for live sports programming — and particularly for live sports telecasts emanating from cable networks.

Live sports telecasts represented 19 of the top 25 programs on cable this year, according to ESPN, which is poised to finish as the most watched network on cable for the year in primetime.

Most cable networks carrying live sports events this year either set ratings records or generated strong performances from their coverage. ESPN set an all-time cable ratings record by drawing 33.6 million viewers for the Ohio State-Oregon College Football National Championship game on Jan. 12, while TBS garnered a network-record 16.7 million viewers for the Kentucky-Wisconsin NCAA men’s basketball Final Four national semifinal game on April 4.

Sports fans dished out record amounts of cash for pay-per-view events in 2015, bolstered by the May 2 Floyd Mayweather-Manny Pacquiao fight, which obliterated all pay-per-view event-revenue records by generating $400 million.

Sports fans also chatted up the year’s biggest sports events on Twitter, including NBC’s Feb. 1 New England- Seattle Super Bowl telecast, which drew a television show-high 25 million tweets, according to Nielsen.

With increased viewing via digital video recorder, video- on-demand and TV everywhere platforms taking a bite out of traditional TV entertainment-network ratings in 2015, sports telecasts remain one of the few video properties that continue to be DVR-proof and more than hold their value in the evolving television marketplace.

As more live sports games make their way onto digital platforms through TV Everywhere services like Watch ESPN and over-the-top game packages like “NBA League Pass,” the value of such content undoubtedly will continue to rise as distributors jockey to secure rights to content that will draw not only hard-to-reach male viewers, but legions of casual sports fans across all demos.

The beat will seemingly to go on in 2016 as big events such as Super Bowl 50 and the 2016 Summer Olympics — along with technological advances such as 4K and virtual reality — promise to further enhance the broad appeal of live sports programming and provide a win-win ratings scenario for distributors across traditional and digital platforms, as well as social media.

Driven by high-margin high-speed Internet and commercial services, cable operators are expected to generate some of the largest profit margins in the media & entertainment industry in 2015, according to a report from accounting giant EY.

In its report, Spotlight on Profitable Growth, EY (formerly Ernst & Young) predicts that earnings before interest, taxes, depreciation and amortization (EBITDA) margins will reach 40% in 2015 for cable operators. Cable networks, which have been battered over fears of competition from over-the-top video services, nevertheless will post EBITDA margins of 36% according to EY, fueled by gains in digital licensing revenue and higher affiliate fees, partially offset by advertising declines.

Satellite TV services like Dish Network and DirecTV (recently acquired by AT&T) are expected to show lower margin growth, about 25%, in 2015, EY says.

TV broadcasters, expected to grow EBITDA margins 21% in 2015 should benefit from continued consolidation in the industry, particularly through higher retransmission consent fees, digital distribution growth and international syndication, EY says.  

Other segments within the media & entertainment sector tracked by EY should fare as follows: interactive media, 34%; information services, 30%; electronic games, 28%; conglomerates, 28%; film and TV production, 14%; consumer publishing, 13%; and music, 13%.

Overall the Media & Entertainment segment is expected to grow EBITDA margins 28.3% in 2015, compared to 27/8% growth for the S&P 500 Index.

"The evolution of the M&E industry continues to focus on the exploitation of digital distribution and finding new and innovative ways to reach and interact with the consumer,” said EY Global Media & Entertainment Leader John Nendick in a statement. “With surging demand for content, M&E companies are growing their profitability through multiple consumer offerings, better knowledge of consumer tastes and preferences and continued international expansion."

A downpour of TV content is forecast for this week on the 10th anniversary of Hurricane Katrina and the devastation it unleashed on the Gulf Coast region in general and on New Orleans in particular.

In 2005, cable networks were among the first outlets to show the images of the stunning destruction to property and people’s lives in the days following the storm. Other specials through the years, such as HBO’s Emmy-winning When the Levees Broke: A Requiem in Four Acts, helped chronicle the effects on life on the Gulf Coast in the immediate aftermath of the storm.

This week The Weather Channel is leading the charge with a week of Katrina-themed content, including Katrina 2065, a special that looks at likely scenarios that could take place if Katrina hit 50 years from now. On Friday, Aug. 28, TWC will air a special report, Katrina: 10 Years Later, with Al Roker and Stephanie Abrams.

Also that Friday, TV One will look at the plight of education in New Orleans a decade after Katrina as part of its daily News One Now morning news series hosted by Roland Martin.

BET on Aug. 26 will premiere a news special, Katrina 10 Years Later: Through Hell in High Water, that will chronicle the lives of a diverse group of people who survived Katrina.

On the cable news network front, CNN will debut on Aug. 24 Katrina: The Storm That Never Stopped, in which network anchor Anderson Cooper travels back to the Gulf Coast and looks to reconnect with those residents and people he spoke with a decade ago following the storm.

On the digital front, offerings will include six-part documentary series New Orleans, Here & Now, from Time Inc. and Rampante, debuting Aug. 27 on Time.com and other platforms. It’s about six people living in New Orleans 10 years after Hurricane Katrina and is the first original premium video product from Time. Weather.com on Aug. 25 will stream nine hours of continuous highlights from 2005 Katrina coverage, starting at the same time as the 2005 coverage began and featuring clips from The Weather Channel.

And in real life (apart from TV), FYI has teamed with the affordable housing non-profit Make It Right to build a solar-powered new tiny home in New Orleans for a middle school teacher. On Aug. 28, they will host a house-warming event at the new 469-square-foot domicile in New Orleans’s Lower Ninth Ward, including Tiny House Nation host John Weisbarth.

— R. Thomas Umstead

Think Tank to FCC: Charter-TWC Deal Should Sail Through

Free-market think tank The Free State Foundation has released a paper outlining the benefits to consumers and broadband of a Charter Communications-Time Warner Cable merger.

Free State senior fellow Seth Cooper said the purpose is not to endorse or oppose the deal, but instead to outline the key considerations the Federal Communications Commission should be, well, considering. But Cooper clearly likes the cut of the deal’s jib and suggests it deserves fairly smooth sailing through the FCC and DOJ deal-vetting process.

He said the potential downsides for consumers appear minimal, and maybe nonexistent, and drew a distinction between this proposed merger and Comcast’s earlier play for TWC, abandoned after the Justice Department and the FCC agreed it should not go through.

Concerns about program withholding or broadband domination don’t apply to a Charter- TWC deal, Cooper said (though he does not concede they should have deep-sixed the earlier deal, either). “Whereas Comcast-TWC would have resulted in a nationwide broadband consumer subscription market share of about 30%, Charter-TWC would result in a nationwide broadband market share of about 21%. And those are numbers for wireline broadband only. The broadband market is much bigger: 43% of all broadband connections are now mobile, with next-generation wireless networks increasingly offering consumers three or more competitive mobile video viewing options.”

In any event, he said, the FCC should not look at “static” indicators like market share or concentration, but instead view the deal in the light of free-market dynamism, a light in which the deal looks good for consumer welfare, he said.

Cooper also called for a swift review, which may already be a bridge too far. The FCC at press time had yet to launch the comment cycle or start the informal shot clock on the deal, as it is still mulling the issue of how to treat third-party access to confidential information submitted by the parties involved.

— John Eggerton

Messaging platform Snapchat has launched an ad-supported platform offering users curated video collections from a group of TV networks and other content publishers.

Cable networks ESPN, CNN, Comedy Central, National Geographic, Food Network and Fusion are among the first networks delivering content for Snapchat Discover, which Snapchat said provides a “storytelling format that puts the narrative first. This is not social media.”

The editorial and multimedia content is curated by each contributing company and packaged as individual daily editions featuring five to 10 stories each. Each provider’s content will be refreshed every 24 hours.

Snapchat estimates it reaches 100-plus million monthly active users. So far at least a dozen content providers have joined the platform, including Yahoo News, People, Vice Media and other print and online publishers in addition to the networks.

Read Snapchat's blog announcing Discover and watch a video touting the new platform.

Bouyed by high-margin broadband and commercial business products that continue to make up for a declining video business, cable operators continue to lead their media peers in terms of profitability, according to a report issued earlier today by consulting firm EY (formerly Ernst & Young).

According to the report, cable operators will lead the sector with 2014 EBITDA margins of 41%, followed by cable networks (37%), interactive media (36%), electronic games (29%), conglomerates (26%), satellite television (26%), publishing and information services (21%);  television broadcast (19%); film and television production (12%); and music (11%).

“We are seeing that digital is very much driving profits now, instead of disrupting it. Companies are figuring out how to monetize the migration of consumers to a variety of digital platforms, and this insatiable demand for content is fueling growth throughout the industry,” said Global Media & Entertainment Leader John Nendick in a statement.

In an interview, Nendick said while the sample used in the report included international as well as domestic cable operator and networks. And he added that EBITDA, which is more a measure of efficiency, does not include capital expenditures, which could affect the bottom line.

“Our experience to date has been to date that while there has been some minor subscriber reductions, or cord shaving, it hasn’t really moved the meter in terms of overall performance,” Nendick said in an interview.

Other highlights from the report include:

•  Cable networks are seeing growth in affiliate fees, international syndication and digital

licensing which is spurring EBITDA margin growth making it the second most profitable

industry sector.

•  Interactive media companies are driving their margins through innovation in search and

online video advertising combined with growth in premium video subscriptions.

• Electronic gaming companies are seeing growth in profitability from the increasing

number of users on digital platforms.

• Conglomerates are using their ability to spend on premium content to attract large

audiences and create a barrier to entry for smaller players.

• Satellite television companies are maintaining cost controls to counter slowing

subscriber growth, however rising programming costs will adversely affect the sector’s

profitability.

• Newspapers and magazines continue to see declining advertising and subscription

revenues. While digital revenues are growing, this only makes up a very small portion of

overall revenues.

• Television broadcasters’ ability to reach a large, albeit shrinking, audience continues to

be valued by advertisers. Consolidation among broadcasters is expected to help them

sustain increases in retransmission fees.

• Film studios are driving their profitability through increasing revenues from digital

platforms and investments in franchise-based films and higher-margin television shows.

• The music sector is driving record growth in profitability from the expansion of licensed

digital subscription and streaming services, growth in music publishing and rising

smartphone and tablet penetration in emerging markets.

A new study on the rising age of television viewers, along with primetime ratings results from this summer’s top cable networks, should cause programmers some concern.

The median age of viewers during the 2013-14 TV season has risen by 2.5 years, to 44, since the 2009-10 TV season, according to MoffettNathanson Research. Further, the

research said, cable viewers have gotten 8% older in the past five years and are now a median age of 40.

Outside of the kids’ networks, the survey said  the youngest networks were Nick At Nite (20.8 years), MTV2 (23.2), MTV (23.5) and Adult Swim (23.8). But even all of those networks are

skewing older than they were during the 2009-10 season, according to the report.

Those findings are consistent with viewership for the most-watched cable networks on cable in primetime this summer. Seven of the top 10 networks posted double-digit declines among the younger

18-34 audience during the period of May 26 to Aug. 31, according to Nielsen. Only Fox News Channel and ESPN — both of which had significant live programming events/breaking

news stories during the summer -- posted increases in the demographic.

The top 10 cable networks didn’t fare much better among total viewers, with six out of 10 posting year-to-year declines, but the decline in younger viewers is particularly notable.

While younger viewers are accessing programming on alternative platforms, the numbers show that the migration from traditional TV to other distribution outlets could be accelerating. These are the

consumers cable needs to attract and secure to replace the older viewers as subscribers.

Fox Cable Networks ad-sales president Lou LaTorre issued a rosy forecast for cable network ad sales in the coming broadcast year, with billings increasing about 5% in the upfront auctions and 5%-6% overall when scatter market sales are added in after the upfronts.

“Cable will be very healthy in this coming year,” LaTorre told reporters at an upfront briefing today at 21st Century Fox’s offices in New York City.

He projected the 5% gain in upfront ad-sales commitments as worth about $500 million to cable networks. Over the full year, he said, the gains should be about $1 billion.

He also said he did not think broadcasting and syndicated programming ad sales would see any increases, because of their “continued loss of audience.”

Those revenue forecasts are in line with projections this week from RBC Capital Markets analyst David Bank, who predicted no gain for broadcasters in terms of ad sales for the 2014-15 broadcast year compared with a 2013-14 total of about $13 billion.

Bank forecasts a 4% overall gain for cable network ad sales in 2014-15, rising to about $26.9 billion from about $25.9 billion.

As for ad pricing, LaTorre said he thought top cable networks (including FX) would see full-year of 7%-8% on a cost per thousand (CPM) impression basis. Smaller cable networks should see gains in the 3%-5% range, he said.

Bank’s upfront pricing prediction was a 7.1% gain for cable networks. He predicted 55.6% of all ad sales revenue would be booked in the upfront in the 2014-15 year for cable networks.

LaTorre also predicted more cable programmer deals -- especially for original shows that are heavily DVRed -- using C7, or viewership over seven days, instead of the C3 standard that measures commercial ratings over three days after a show's premiere. Cable originals gain about 6-8% in viewership over the extra time span, LaTorre said, and agencies can tell their clients they are adding great content at perhaps a "slight rollback" on a CPM basis for the later views. He said some broadcast-network deals were done last year using C7 and he thinks "several" cable networks will cut C7 deals this year.

Also at the upfront briefings, John Landgraf, CEO of both FX Networks and FX Productions, talked about the plan to pack FX and FXX with original programs while holding off adding originals to movie service FXM; the variables involved in doing subscription VOD deals with the likes of Amazon, Hulu and Netflix and the reasoning behind building a stockpile of comedies using so-called 10/90 orders.