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Disney caught in cable mousetrap
Disney would see its TV distribution fees tumble by 65 percent, or $5.4 billion, if cable channel programming were based on customer loyalty, according to an eye-opening report yesterday.
The Mouse House, which rings up $8.3 billion a year in program fees — roughly 26 percent of all such fees — would see that total drop to about $2.9 billion if left solely to loyalty, the report said.
The report, by Lazard Capital analyst Barton Crockett, found that while Disney gets high marks based on customer loyalty for ABC and ESPN, that it is already more than well compensated for that enthusiasm.
Crockett undertook the research for the report after being shocked by DirecTV’s agreement to pay struggling Viacom a 20 percent bump in fees — even with weak ratings at Nickelodeon.
The analyst wanted to know what distributors would pay if it were based on customers’ loyalty.
Crockett’s report also suggests CBS and Discovery would benefit the most if distributors looked at loyalty rather than ratings.
The report asked consumers if they lost a channel from their package, what would make them willing to switch.
Surprisingly, Discovery Channel came second behind ESPN in cable. CBS came tops in broadcast.
The report contradicts conventional wisdom that programmers’ push for more cash from distributors will force price increases on the consumer and ultimately turn them into cord-cutters.
Still Crockett believes there “could be some reallocation [of distributors’ programming budgets] in times of stress.”
Crockett’s report comes at a time when distributor- programmer battles are causing blackout havoc, and as lawmakers look into changing the Cable Act, which governs such talks.
Related articles
- Behind the TV channel blackouts: stalling profits ()
- Pay TV model won’t die anytime soon, analyst says (paidcontent.org)
- TV channel blackouts becoming more common as profits stall (usatoday.com)
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