In Tough Climate, Weather Channel Looks to Bolster Relationships
Related: As the Bundle Unravels, Relationships Shift Too
Dave Shull, president of The Weather Channel, knows how distributors treat independent networks like his.
In his previous job as chief commercial officer at Dish Network, when Shull looked for ways to restrain costs, the five or six major media companies that got about 90% of the billions the satellite-TV provider spent on content had leverage, making reducing payments to them problematic.
“So when I was trying to save money, I looked at the list of 100 various independents, the small channels, and said ‘OK, who can I pick off here?’ ” he recalled. “I’ve got to pick on the small guys.”
While the distribution part of the network business is particularly challenging, being an independent at a time of industry consolidation and consumer demand for skinnier bundles means staying on your toes.
‘You’ve Got to Adjust’
“I keep telling my team you’ve just got to hustle. You can’t rest on your laurels,” Shull said. “You’ve got to work it a little differently. Stop doing what we’ve been doing for 35 years and think differently. That’s probably the biggest message to my independent compatriots: ‘The world’s changed, so you’ve got to adjust.’ ”
Research firm Kagan has estimated that despite getting just 15 cents per subscriber per month from distributors, The Weather Channel will grow its cash flow to $145 million in 2017 from $132.8 million in 2016.
Kagan sees affiliate revenue edging up to $157.4 million in 2017 from $154.9 last year, but down from its peak of $162.3 million in 2014, when pay-TV subscriptions were peaking and Weather was one of the most widely distributed cable networks.
Similarly, Kagan sees ad revenues rising 7% to $156 million in 2017, but down from a peak of $162.7 million in 2012.
“Definitely it would be much more valuable as part of one of the major media conglomerates,” Kagan research director and senior analyst Derek Baine said. “There are other channels, like Weather Nation, that are waiting in the wings to replace them whenever there is a carriage dispute.”
Landmark Communications sold The Weather Channel to a consortium including NBCUniversal in 2008 for a reported $3.5 billion. In 2015, IBM bought The Weather Co.’s digital and technology assets, including Weather.com, for $2 billion, leaving the cable network as a standalone.
The Weather Channel does some ad hoc content sharing with NBC during storms, but the programmers don’t work together on ad sales or distribution.
Under Shull, Weather has come up with a couple of tactics for making itself more valuable to operators. Under pressure from distributors that didn’t like a move into reality series, the network has refocused its programming on weather. “As an independent, we have to know who we are,” he said.
It gathered its biggest fans — weather geeks and weather nerds — into a community by signing them up at a website called WeLoveWeather.TV.
“We now have almost half a million users and we’re talking to them on a daily basis, giving them behind-the-scenes access to what our talent is doing,” Shull said. “Candidly, we’re using that as a tool in our conversations with distributors.” Distributors can appeal to those fans to keep their pay-TV subscriptions. Or, in the event of a dispute, those fans can push distributors to not drop the network.
The Weather Channel also sees itself as playing a public-service role in helping people prepare and stay safe during weather emergencies. Shull said he spends a lot of time in Washington, D.C., with members of Congress, government agencies such as the Federal Emergency Management Agency, governors and state agencies. Being close to government officials also makes the network valuable to distributors.
“We want to make sure we can be helpful in D.C., and helpful with our weather nerds from a [subscriber] retention point of view and really create a firm partnership,” Shull said.
Despite all of that, Weather has been off Verizon’s Fios TV service since 2015.
“Although we are currently not on the Fios platform, we are always open to sitting down with them to discuss relaunching The Weather Channel, especially since their subscribers are constantly taking to social media asking when TWC will return to the lineup,” a network spokesman said.
Fios now has a deal with AccuWeather and declined to talk about The Weather Channel. “We’re happy with what Accuweather has brought to us in terms of weather content,” a Fios spokesman said.
Being independent also gives the network less clout with media buyers. “We have to compensate and adjust for that,” Shull said. “The advantage we bring to the buyers is that we’re purely focused on one brand, and we’re able to highlight a lot more of what we can do from a sponsorship point of view.”
In the upfront, Shull said The Weather Channel was up in volume (“not as much as NBC is”) with price increases on a cost-per-thousand (CPM) basis in the mid-single-digit range.
Sixty percent to 70% of Weather’s ad sales have a sponsorship element, he said. The big deal now is using augmented reality technology to bring sponsors’ products into the network’s programming.
Augmented reality helps integrate sponsors’ products into the channel’s studio shows and special segments. A car can drive through the weekend-driving forecast, for instance, or a brand could show up on billboards in a virtual stadium where the effects of hot weather on the distance of a thrown or kicked ball are being explained.
The technology was also used to bring a tornado and the damage it can inflict on a town into the studio for a segment sponsored by insurer State Farm. Other brands sponsoring augmented reality on The Weather Channel include Jeep and Behr paints.
Since people rarely DVR weather reports, commercials tend to get watched in real time. The network commissioned a study by TiVo that found that it was No. 1 in the percentage of viewers who watch the first second of a commercial break and stayed till the last second of the break.
Like other networks, The Weather Channel is looking for spots within the new virtual multichannel video programming distributors (MVPDs) now popping up. It created a new service, Local Now, designed to bring local weather and other news and information to these vMVPDs at a lower cost that the retransmission payments local-TV stations demand.
“The delivery method for this content is really different,” Shull said. “It’s not just linear channels. It’s on-demand segments for local news and information. It’s emergency alerts. And we can present off of that in a sort of a dashboard form, which is really unusual.”
Local Now can help vMVPDs offer their subscribers something that feels different from standard TV. “This is a much more interactive, customized feed of video content for the consumer.”
Local Now is on Sling TV, You-Tube TV, DirecTV Now, CenturyLink Stream, MobiTV and fuboTV. Some of those distributors have taken both The Weather Channel and Local Now.
Local Now subscribers who authenticate can also stream the live feed of The Weather Channel. TWC charges vMVPDs a subscriber fee, but it doesn’t sell advertising yet. Subscribers to the Weather Channel can authenticate and access Local Now.
Building Up the Streams
Local Now is delivering 250 streams to distributors and Shull would like to get that up to about 500 before launching advertising. The service has a couple of million subscribers, per the network.
“My ad sales team is chomping at the bit to start selling,” Shull said.
The Weather Channel expects its viewers to follow the solar eclipse to take place Monday, Aug. 21. The network’s team of meteorologists will be positioned around the country, including live reports from Clemson University; Southern Illinois University; Jackson Hole, Wyo.; and Madras, Ore.
Coverage will begin during the AMHQ morning show at 5 a.m. and continue through the day, with forecasts for the best viewing locations. The network will use augmented reality technology to examine the science behind the eclipse.
The event will be sponsored by Dish Network.
What’s next? “We’re spending a lot of time looking at beyond augmented reality, we’re looking at 360 cameras, we’re getting deep into virtual reality,” Shull said. “That’s a big focus for us.”
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Jon has been business editor of Broadcasting+Cable since 2010. He focuses on revenue-generating activities, including advertising and distribution, as well as executive intrigue and merger and acquisition activity. Just about any story is fair game, if a dollar sign can make its way into the article. Before B+C, Jon covered the industry for TVWeek, Cable World, Electronic Media, Advertising Age and The New York Post. A native New Yorker, Jon is hiding in plain sight in the suburbs of Chicago.