'Flanker' Brands Score Big

Investment in emerging channels pays dividends for bigger siblings

There's more Cooking on cable. More History too.

Cable programmers are pouring more resources into emerging channels - which often serve up variations on the same fare offered by the flagship brands - as a way to protect their mature networks from rivals and grow revenue.

Take the Cooking Channel, started by Food Network owner Scripps Networks Interactive a little more than three years ago. Michael Smith, general manager of Cooking Channel, says Scripps' recipe was part offensive and part defensive. "We saw demand for food programming growing dramatically," Smith says. At the same time competitors' appetites were being whetted because Fox and Bravo were showing that cooking shows could draw viewers for them as well. "By creating a second channel of our own we could blunt that activity."

The proof is in the pudding. In its first year, Cooking Channel's ratings doubled Fine Living's. Last year, revenues were up 34% to $89 million in 2012. Scripps has pursued a similar blueprint when it launched the DIY Network to buttress HGTV. Both new networks programmed how-to programming as the more mature networks went for more entertainment value.

Metastatic Momentum

Scripps isn't alone pursuing this strategy. Last year, A+E Networks rebranded its History International channel as H2. Ratings in the 25-to-54 year old demo were up 38% last year and are pacing up 34% so far this year. A+E also recently hired BBC executive Jana Bennett as president of its emerging Bio and LMN networks to strengthen A&E and Lifetime. Given their position relative to the "quarterbacks" on the field, some call these new ventures "flankers."

"The real growth opportunity from an affiliate and a revenue standpoint is definitely from these emerging networks," said Dirk Hoogstra, executive VP and general manager for History and H2.

Discovery Communications sees Science Channel as a growth engine. GM Deb Myers says that since 2008, ratings have risen for 18 straight quarters, distribution is expected to hit 80 million homes, up from 54 million, and ad sales have tripled.

The network has taken Discovery Channel's core science mission and added some pop culture. It will be the home for the company's first scripted show, 73 Seconds, The Challenger Investigation, starring William Hurt as physicist Richard Feynman. The show will be simulcast on Discovery.

"When we want to attract a bigger audience, we will either give a window to Discovery or we will simulcast," Myers says. "It works the other way too," she added, noting that MythBusters will be airing on Science.

More Than Copycats

Cable programmers have been launching related channels for a long time. There are a nest of ESPN Networks. VH1 was originally a grown-up version of MTV and now both brands come in a variety of flavors. There are also the movie channel spinoffs from Lifetime and Hallmark, which, according to Derek Baine, analyst at SNL Kagan, which were built on programming synergies, but now do original programming.

"I think more interesting is what Scripps is doing with Cooking and DIY," says Baine. "Cooking is really testing new shows . . . and if they are very successful they can be ported over to the bigger Food Network."

DIY and Cooking are doing "pretty well" with advertising front and have gotten a good reception from operators. "I think there is a place for these networks, but they have to be priced very low," he says.

But original programming, the key ingredient making the networks grow, is expensive. According to Kagan, programming expenses rose 15% from 2012 to 2011 at the Cooking Channel. At DIY, programming costs rose 9%. H2 recorded a 12.5% increase at H2.

Those investments in programming seem to be paying off. In addition to the big gains Cooking Channel, net operating revenue rose 18.1% at DIY 21.2% at H2, and 13.1% at Science, according to Kagan.

The investment helps at time when distributors are questioning carrying some little-watched channels.

"Operators are definitely looking for networks to justify their value," says Smith. "One of the things we're proud of at Cooking Channel is we do produce hundreds of hours of original programming."

Each flanker network looks to distinguish itself from its mother ship. Cooking aims to have a more independent flavor while stocking up on genres no longer popular on Food Network, such as in-studio instructional shows that are cheap to make. (About 30% of Cooking Channel viewers don't watch Food, Smith said.) Cooking recently launched The Freshman Class, focusing on people trying to turn their lives around by going back to cooking school. The network also airs reruns of shows from Food, such as Iron Chef America and Good Eats. At the same time, some series, like Hungry Girl and Heatseekers, move from Cooking to Food.)

Similarly, Hoogstra says that History is "entertainment focused with the history baked in," while H2 is more geared to pleasing viewers seeking information.

Coming up on H2 next year is The World Wars, from the producers who did Men Who Built America for History. It will focus on how World War II affected the people who became leaders during that time. "It will be a really high-quality production," Hoogstra says.

How big can a flanker like H2 get? "I see potential to continue to grow. Where it maxes out I don't know," Hoogstra says. "I don't know what the ceiling is yet. But we will find it. We're going to push and push and see how high we can take it."

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