During the 1980s, at a time when cable television was still in its infancy and music videos were at their most innovative, Doug Herzog often traveled economy class for his role as a junior executive in MTV’s programming department.
Whenever he went on a trip, Herzog ensured to don clothing bearing the well-known brand symbol and carried along plenty of merchandise from MTV – t-shirts, hats, and tote bags. At the check-in desk, if the ticket clerk was under 50 years old, Herzog often sparked a query or remark about MTV. Whenever this happened, he promptly offered the clerk a complimentary T-shirt or hat.
Before you knew it, I found myself traveling in luxury,” Herzog reminisces, “and that was pure gold. Everyone adored those satin MTV jackets and would have gone to great lengths to possess one during that time.
Today, you can find MTV T-shirts in Target stores, but wearing one won’t get you a first-class upgrade on an airplane. Unfortunately, MTV’s popularity has dwindled significantly to the point where many Gen Z and Gen Alpha viewers have barely seen the channel, except for brief clips shared on TikTok or YouTube. In fact, very few people today watch MTV through traditional cable TV subscriptions.
Not just MTV, but many traditional cable television networks such as CNN, USA Network, ESPN, Nickelodeon, TNT, Discovery Channel, and A&E Network are experiencing a continuous decrease in business. Some might even say they’re in a state of deterioration, worsened by insufficient investment. Although the decline has been occurring for some time, industry veterans are still taken aback to see well-known brands disappearing in the face of competition from streaming platforms. In recent years, funds and resources that NBCU previously allocated to channels like USA and Syfy have been redirected towards strengthening NBCUniversal’s Peacock service.
The struggles faced by cable companies are best illustrated by the news from Comcast, a major cable and broadband service provider in the U.S., which announced in late November that it would be offloading most of its linear cable channels. While NBCUniversal, a subsidiary of Comcast, will continue to manage the NBC network and Bravo, it plans to disentangle itself from the challenges faced by seven channels that were once crucial to its TV division: USA Network, CNBC, MSNBC, Syfy, E!, Oxygen Media, and Golf Channel. Additionally, digital assets like Fandango and Rotten Tomatoes will also be affected by this decision.
If the current situation isn’t significant enough for the business, there are also major changes happening elsewhere. This year, Channing Dungey has taken over as the leader for Warner Bros. Discovery’s ad-supported entertainment networks, and she’s planning a new direction for channels such as TNT, TBS, and Discovery while still prioritizing her role as head of Warner Bros. TV Group. Meanwhile, Paramount Global is on the verge of being acquired by Skydance, which will bring in a fresh leadership team with their own ideas about how to handle a once-thriving assortment of cable brands like MTV and Comedy Central.
After Netflix transformed our television viewing experience, it sparked a shift in focus for media titans who own major cable channels. Instead of relying on traditional cable, they’ve been investing in streaming services like Peacock, Max, Disney+, Hulu, and Paramount+. These platforms are effectively replacing cable for a new generation of viewers. As this generational change unfolds, established outlets that continue to bring in substantial profits have found themselves struggling to compete.
Experienced professionals in the media industry are disappointed by how swiftly Big Media abandoned the branded channels that initially introduced cable TV to American audiences in the 1980s, providing a lucrative dual revenue stream. Some warn against getting sentimental and remind us that consumers have been making their preferences clear through their purchases for the past 15 years. In the U.S., subscriptions to cable and satellite services reached approximately 100 million households in 2010, which represented about 90% of all TV homes. Currently, this figure has decreased to around 85 million, accounting for roughly 65% of potential households.
Evan Shapiro, a media analyst and NYU adjunct professor with experience in New York’s bustling cable programming industry, expresses regret over the disappearance of many brands. He attributes this to a striking absence of strategic planning within most of these companies, which he finds bewildering. In essence, he claims that rather than making informed decisions about where to invest resources, these enterprises are often resorting to making indiscriminate cuts to boost profitability.
Comcast plans to execute a complex stock transfer to separate the channels into a smaller, as-yet unnamed company (temporarily known as “SpinCo,” but discussions are underway for new names among NBCU marketers and external agencies). The majority of shares in this new entity will be held by current Comcast shareholders. Apart from NBC and Bravo, the streamlined NBCUniversal will continue to manage Peacock, Telemundo, Universal’s substantial film and television studios, Universal theme parks, and Sky pay TV services operating in the U.K., Germany, Italy, and Ireland. The transaction is anticipated to be finalized by the end of this year.
At SpinCo, Herzog expressed, “My initial reaction was ‘Amazing, they’re constructing an iceberg that basks in the sun,'” referring to a peculiar sight. He further added, “I must admit, I’m left scratching my head about it.” (It is worth noting that Herzog held leadership positions during the cable era, particularly with networks such as MTV, Comedy Central, and USA Network. However, he parted ways with Viacom as the head of its music division in 2017. )
In simpler terms, Comcast is proposing a separation of NBCUniversal and Universal Studio Group as the optimal solution for both entities. This move allows NBCUniversal to concentrate on managing two robust networks, each catering to unique audiences, with an emphasis on popular aspects of their streaming service Peacock, particularly live sports and addictive content like Bravo programming. On the production end, Universal Studio Group continues to distribute shows to various competitors such as Netflix, Amazon, Hulu, and CBS, thereby gaining significant influence in the market. The streamlined NBCUniversal is estimated to generate approximately $40 billion annually. The separated company, known as SpinCo, is projected to bring in around $7 billion, while assuming minimal debt following the stock spinoff. Mark Lazarus, a seasoned executive from NBCUniversal, will depart as part of the split and assume the CEO position at SpinCo.
According to Lazarus, NBCU has a robust collection of resources at their disposal, as they’ve consistently chosen to close underperforming cable networks like Esquire, Cloo, Sleuth, G4, NBC Sports Network, and Universal Kids over the past decade. He highlights that the remaining channels offer potential, particularly in live sports, with USA Network retaining the rights for the Olympics and hosting the Premier League and NASCAR. Additionally, Golf is growing its presence in the niche sport sector. For E!, Lazarus emphasizes its live red carpet coverage. Lastly, he mentions that digital opportunities are emerging with MSNBC and CNBC, having recently launched their own streaming platform.
It’s anticipated that with a more concentrated effort, the management at SpinCo might discover innovative strategies to slow down its decline, and potentially revamp its platforms using fresh original content. Simultaneously, an unusual opportunity presents itself in the corporate world: SpinCo is currently recruiting new employees. As it separates from NBCU, it requires a news-gathering team (including a head of this department who will report directly to interim MSNBC president Rebecca Kutler) for MSNBC now that they no longer have access to resources from NBC News.
At the moment, SpinCo is deliberating on the appropriate way to divide MSNBC and CNBC from NBC News. This could involve relocating some NBC News employees or assets to MSNBC. In sports, SpinCo will need to assemble a team to handle its sports league agreements (even though they’ll mostly outsource production to NBC Sports).
At present, MSNBC doesn’t offer a streaming service, while CNBC recently debuted CNBC+, which is still in its initial phase. Lazarus points out that most of NBC News’ digital funds have been allocated towards NBC News Now and “Today,” but with SpinCo’s financial resources, they can now develop additional branches based on their linear cable products. This could potentially lead to more events, newsletters, audio content, and other subscription-based offerings beyond the traditional networks.
Lazarus explains that they now possess the financial resources needed for investment into these specific companies. This newfound financial power enables them to direct funds and concentration towards the digital advancement of MSNBC and CNBC, catering to their devoted and dedicated audience. Presently, no sports from USA and Golf Channel are streamed online. Thus, there’s an exciting digital future on the horizon for sports. Whether they venture independently or collaborate with third-party distributors remains to be seen. Additionally, Fandango presents a significant digital opportunity, allowing them to expand through acquisitions of businesses that align with their financial goals and strategic vision.
As a movie enthusiast, I often ponder if we might see more networks emerging, perhaps as competitors decide to divest some of their channels? Lazarus makes it clear that SpinCo isn’t interested in acquiring just for the sake of growth, but rather properties that offer “genuine strategic value” to our company.
In the city, companies such as Paramount Global and Warner Bros. Discovery are expected to closely watch how Comcast handles its separation, and see what SpinCo plans to do with its holdings. It’s clear that many other companies may contemplate a similar approach to offload underperforming cable networks.
The main issue lies in the fact that major financial institutions believe it’s unlikely for traditional cable channels to recover, as the number of cable subscribers decreases annually due to households canceling their service and younger generations not subscribing in the first place. This trend is fueled by an increasing number of households opting to “cut the cord” (cancel their cable subscription).
According to Naveen Sarma, Media & Entertainment managing director for S&P Global Ratings, it’s believed that the decline of linear TV in the U.S. is not likely to be reversed, but rather than a sudden drop-off, it will happen gradually over an extended period. He also cautions that as companies continue to hold onto their linear TV networks, their value decreases day by day.
Was it necessary for the cable to fail so suddenly? Shapiro could pinpoint the exact time in 2019 when the entertainment titans reached a critical juncture regarding their cable holdings.
During a span of one year, each one introduced ad-free streaming services,” he points out. “I’m astonished! What led to this decision? They all pursued a business strategy that we all understood, in theory, wouldn’t succeed. It’s as if you switched from a two-source revenue model to a single source, and expected everything to be fine?
In April 2022, Netflix’s earnings report revealed a shocking subscriber decline that caused its stock price to dive sharply. This unexpected setback made those who abandoned traditional cable services to launch streaming platforms reconsider their quick decisions, yet they were bound by the reality of their choices.
Looking back, I’ve always admired the magnetic allure of USA Network during its golden age, roughly spanning from 2005 to 2015. NBCUniversal, in a peculiar twist, seemed to overlook this once thriving brand that offered an array of captivating shows like “Monk,” “Burn Notice,” “White Collar,” “Suits,” “Royal Pains,” and “Mr. Robot.” The network’s popularity was further fueled by its decades-long partnership with WWE, providing a home for “Monday Night Raw.” At its peak in 2009, USA Network garnered as many as 3.3 million viewers during primetime.
Currently, USA Network focuses more on sports programming and reruns rather than scripted shows. Shows like “WWE Raw” can now be found on Netflix, and popular series such as “Suits” also experienced a successful resurgence in viewership on the platform. Interestingly, a revival of “Suits,” titled “Suits LA,” is moving to NBC, not USA. However, USA Network still holds onto some WWE content with “Smackdown.” Despite this shift, sports and reruns have been keeping the network operational. Unfortunately, in 2020, USA Network ranked at number 9 among cable networks, averaging around 673,000 viewers.
Despite a grim long-term outlook, cable networks continue to be profitable income sources in the near future. On February 5, Disney’s CEO, Bob Iger, faced questions about his long-term strategies for ABC, Disney Channel, Disney Jr., Freeform, and other channels from Wall Street analysts. He acknowledges the current challenges, but remains committed to pay TV, which has been a major contributor to earnings for the largest Hollywood entertainment corporations for over two decades.
In a nutshell, the linear networks within our company aren’t a hassle; they’re valuable resources,” Iger stated. “We invest in them sufficiently to boost our entire television industry, encompassing and prioritizing streaming – undeniably the direction television is heading.
As a passionate movie and series enthusiast, I’ve noticed Charter Communications sharing some positive news lately. They’ve reported a decrease in cord-cutting, attributed to their introduction of slimmer TV packages and recent partnerships that allow them to combine streaming services like Peacock with traditional cable offers. Sarma, an industry expert, suggests this could potentially benefit the overall media landscape. However, he questions whether these slimmed-down bundles are sufficient to counteract current trends.
Where does the cable channel’s future lie? The fees charged for network carriage have a significant impact on companies like Disney, Paramount Global, and Warner Bros. Discovery when it comes to their profits. However, Comcast, with its wide range of businesses such as broadband, cable television, theme parks, and other assets, can afford to let go of the cable network revenue without suffering substantial losses.
To illustrate, Comcast’s cable networks generate only around 5% of its $38 billion earnings (excluding interest, taxes, depreciation, and amortization). As Sarma points out, this could be a logical step if the aim is to separate a business that seems to be in long-term decline. For companies like Paramount Global and Warner Bros. Discovery, however, these cable earnings are crucial since they heavily rely on such cash flow.
As I tread along this ever-changing landscape of entertainment, I find myself among a select group of cable companies still pouring resources into unique content to keep our operations running smoothly. Companies like AMC Networks and Hallmark are included in this group. Simultaneously, we’re innovating by introducing our own niche streaming platforms, such as AMC+ and Hallmark+.
While many have chosen to step back from funding costly scripted series (primarily dramas), AMC Networks has been actively investing. For instance, in 2020, the company acquired television rights to a collection of Anne Rice books. Currently, we have three supernatural dramas inspired by her work in various stages of production: “Interview With a Vampire,” “Mayfair Witches,” and the upcoming “The Talamasca.” Additionally, there are even more projects based on her works in development.
Some, not all, of AMC’s networks have become inactive, primarily IFC and SundanceTV which air reruns of old TV shows predominantly now. However, the main AMC network continues to produce a substantial amount of original content, serving as a potential blueprint for SpinCo’s key assets.
Dan McDermott, president of entertainment at AMC Networks and AMC Studios, states that AMC is not burying its head in the sand. In fact, AMC licenses some of its shows to Netflix, expanding their reach beyond linear TV to a broader audience that aligns with AMC’s target demographic. The revenue generated from these licensing deals with Netflix also helps offset losses experienced through linear TV. McDermott further explains that while the AMC channel remains a significant initial platform for AMC shows, there are now multiple additional avenues or “windows” available as well.
In the past few years, both USA and Turner networks have abandoned their commitment to maintaining a distinct programming identity. However, Dungey and her team are contemplating the creation of low-cost original series to rejuvenate TNT and TBS. This might signal a revival of the “We Know Drama” tagline for TNT or the reinforcement of the “Very Funny” comedy ethos for TBS.
Incoming SpinCo entertainment president Val Boreland, a seasoned NBCU professional joining the new venture, is rumored to consider enriching channels such as USA and Syfy with more innovative content.
Chris McCumber, former president of USA Network, explains that when profits aren’t being allocated elsewhere within the company, they can instead be re-invested into areas like programming and partnerships. He recalls that during the ‘Characters Welcome’ era, USA Network produced shows with modest budgets but high quality. He suggests that it is possible to create dramas, comedies, or any type of programming efficiently now.
Lazarus concurs, stating, “We’ve invited the industry to come forward with their innovative proposals. ‘Business as usual’ is our motto, and we plan to keep investing in a balanced mix of sports, original content, and acquisitions.
Once the NBCU cable networks transfer to SpinCo, they will become independent entities, or “free agents.” Lazarus sees potential in securing additional broadcast opportunities for successful shows on his own channels for these free-agent series.
McCumber highlights that SpinCo has a narrow timeframe to recover, as the U.S. is still generating robust income. He analogizes this situation to a “glimpse of ‘Back to the Future’ for SpinCo’s management.
He emphasizes that these channels are extremely profitable at the moment, though not quite as lucrative as they once were five years back. For instance, USA Network itself generates a billion dollars in revenue. However, when you consider them alongside NBCUniversal (the main operation), they need to support other sectors of the company that have now become more important, such as Peacock. But if we separate them from the main operation, they would be the primary focus.
Entrepreneurial opportunities exist for producers like Jeff Wachtel, who aims to revolutionize programming for the SpinCo networks. Wachtel is a seasoned cable programmer and executive with a track record of driving USA’s programming to its peak in the mid-2010s. He’s currently producing shows using unique financing and distribution strategies for broadcasters such as Fox and The CW – two linear networks that have undergone transformation over the past few years by focusing on live sports and cost-effective acquisitions. Similar to these networks, SpinCo properties will require innovative approaches to acquire original content, and it is precisely this industry knowledge that will be essential.
Wachtel comments, “People might say it’s futile or the system is flawed.” However, survivors see this as a chance. At USA, we produced some excellent shows and were cautious in our approach to development. This allowed us to establish not only a network brand but also shows with lasting value. A few places still have this opportunity. It appears Channing is aiming to do the same at TNT. We’ll see what SpinCo evolves into. Can they attract viewers back? Possibly. Do I think it was foolish to abandon what they had previously built? Yes. But, you can always start anew.
I believe we should examine what made Bravo thrive – its authentic, vibrant, and engaging core centered on Andy Cohen and his “Watch What Happens Live” talk show, as well as cast reunions. Perhaps we can combine this with a dash of the spirited spirit from cable’s early days, focusing on affordable, live, personality-rich programming and interstitials.
Herzog advises speaking directly to your audience,” he says. “I notice that fewer people are willing to take risks nowadays, whether it’s big budget productions like HBO or smaller platforms such as MTV and Comedy Central. In the past, we dared to experiment because we had limited resources, no money, and we thought, ‘why not?’ We weren’t afraid of going bankrupt, so let’s give it a shot and see what happens.’
If it fails, the cable will fight till the end, as Herzog puts it, “survival isn’t a necessity.
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2025-02-12 19:20