Kagan: OWN Losses Could Climb to $142M

Low ratings create issues with advertisers, cable operators; Discovery says report is inaccurate

By Jon Lafayette -- Broadcasting & Cable, 3/21/2012 7:19:32 PM

OWN could saddle Oprah Winfrey and Discovery Communications with a $142.9 million loss this year, according to a report from SNL Kagan.

Kagan analyst Derek Baine says OWN faces a number of problems. They include bad press that could make advertisers impatient and having to renew carriage deals with cable operators in 2012 and 2013 unless ratings move up quickly. "Discovery could end up negotiating carriage agreements for OWN again starting at the end of this year. Its hope for license fees of 20 cents to 25 cents per sub may now be unrealistic."

Baine says Discovery management remains bullish and management including Discovery David Zaslav has expressed confidence that having Winfrey in charge full-time at the network would improve the situation. Last week, the network announced the cancellation of Rosie O'Donnell's low-rated show and a restructuring that includes the departure of 30 staffers and the transfer of some functions to Discovery and Winfrey's Harpo Productions.

Nevertheless, "we're expecting a big write-down in the first quarter and we would not be surprised to see Discovery ask Oprah Winfrey's Harpo Productions to finance some of the network's losses going forward," Baine says. "Stay tuned, the story at OWN is far from over. Ratings for OWN in January were up 10% to a 0.13, after Oprah's new show, Oprah's Next Chapter, aired, but it's still a miniscule rating compared to the programming investment. Without a significant ratings boost by year-end, this could be Oprah Winfrey's last chapter in the cable network industry."

Discovery spokesman David Leavy responded to the report saying it was "riddled with inaccuracies and bad information." Leavy added that "The venture is on more solid ground with more business momentum than ever before." He pointed to Winfrey's show last Sunday, which made OWN the number one cable network for women and people at 10 p.m. "We remain confident in the future of OWN and the long term value we are building."