Uncovering the Truth about Retransmission Value

[Commentary] SNL Kagan has supplied some ammo for stations to take into their next retransmission negotiations with cable and satellite operators. It's a report showing growth of the cash flow margins of cable networks, and it's the retrans equivalent of the Predator drone.

What it shows is just how fat cable networks have become. According to its research, more than 30 networks have margins of 50% or more topped by Nickelodeon, with a 64.6% margin and the Food Network at 60.5%. Next in line: NBCU's CNBC World and CNBC at 59.9% each; Viacom’s VH1 Classic at 59.3%; Discovery Communications’ TLC at 58.7%; The Disney Channel at 57.7%; Scripps’ HGTV at 57.1%; the Discovery Channel at 57%; and AMC Network's AMC at 55.4%. The average margin of all cable networks in 2010 was 41%, which SNL researchers found "amazing, given the fact that there are a number of networks with negative cash flow margins and emerging networks with low margins in the mix. "In addition, sports networks typically have lower cash flow margins than general entertainment and other genres," the reports says. "ESPN, for instance, which makes up almost 15% of industry revenue, has a cash flow margin of just 25.3%." And the gilded gated community of cable's super rich is expanding. By 2015, the number of 50%-margin-plus networks will nearly double to 58, the report says. And there will be another 61 with margins between 40% and 50% and 32 in the 30%-40% range. So, when your local cable operator gags on your asking $1 per sub per month (which is the least you should be getting) and says he can't afford anything close to that, show him the SNL Kagan report and point out that it isn't your neighborhood broadcasters who are getting rich off of his subscribers, but those remote cable networks that, by the way, only have a fraction of the audience that you have. The reason that the cable networks can post such margins despite their paltry ratings is because cable and satellite operators mindlessly pay them programming fees that have no relation to the audiences they are delivering.