The Struggle for Independents

Niche nets face many challenges but like their chances for surviving and thriving

Why This Matters

Industry consolidation has made independent networks’ difficult task of building distribution for their services even harder.

Life as an independent programmer has never been easy. As the industry has consolidated—drastically reducing the number of distributors able to carry smaller, niche networks, and with over-the-top players and skinny bundles coming to prominence—it isn’t getting any easier. Adding to the hardship is a distributor base eager to keep costs low that has singled out smaller programmers for elimination from their lineups.

“Sometimes it’s hard to get the attention you need,” Reelz Channel CEO Stan Hubbard said. “And it’s impossible to demand anything. The name of the game in getting viewership is obviously getting distribution, and you’ve got to get it wherever viewers are.”

But despite the difficulties, Hubbard and other independents remain fiercely, well… independent. They strongly believe in what they are doing—providing new voices and programming that wouldn’t be possible with larger, more-moneyed operations.

“This is the path we chose and the path we’re committed to, and that is independence,” Hubbard said.

Reelz, which is available in about 70 million homes, is one of the bigger independents. And like its peers in the niche programming community, it has managed to survive through a combination of low overhead, innovation and a little luck.

But securing proper distribution is still a struggle and becomes even more critical for independents because they rely almost totally on ad revenue to survive. Any that charge affiliate fees are typically charging very small amounts—less than 10 cents per subscriber per month.

Hubbard said some brands set rules that dictate which networks they will buy ads on. Some won’t buy any networks in less than 40 million homes, some set the minimum at 50 million and others won’t buy any programmer that’s in fewer than 80 million homes.

“As you get smaller, you start to fall off and they’re just not allowed to buy you,” Hubbard said.

Lately, even small networks that have the backing of mega-conglomerates such as NBCUniversal—which shuttered its crime-focused Cloo network in January, switched its Esquire Network to digital-only delivery and has weathered carriage drops from large multichannel video programming distributors for horror-themed channel Chiller—are feeling the pain.

Size Matters

That has been part and parcel of the shift toward smaller video packages and skinny bundles, characterized by Viacom’s decision earlier this year to focus on six core networks. While its 19 other channels aren’t going away—at least not in the near term—those networks will receive less emphasis and fewer resources. Even NBCU, which has about 14 channels, has said that it may have to focus on five or six core brands in the future.

Ovation executive VP, network strategy Liz Janneman said that kind of mega-network pruning could have a positive effect on smaller, independent networks.

“We’re not trying to force you to take five channels in order to get one or two. There’s only one that we have, and only one that we’re having discussions with,” Janneman said. “That makes the conversation a little easier to have, whether it be with distributors or advertisers, because we’re not bundling, we’re not leveraging. The cost benefit is affordable. [It’s] the value proposition.”

Ovation executive VP of content distribution John Malkin said that an independent’s dedication to a specific niche should also be attractive to distributors.

“If you look at Ovation, we’re a one-of-a-kind network in a very saturated ecosystem,” Malkin said. “If you look at the other categories, like sports and entertainment and lifestyle and information, those categories are filled with many different options. If you look at arts, we are literally the only network dedicated to the arts. Affiliates recognize that.”

Not always, though. Ovation, which according to SNL Kagan charges about 8 cents per month per subscriber, was cast into controversy in 2013 when Time Warner Cable (since purchased by Charter Communications) dropped the network for a year, singling it out as an example of a lightly watched channel that wasn’t worth the price.

Ovation eventually got back on TWC systems on Jan. 1, 2014, basically by agreeing to add more original content. And while Ovation remained available in the Charter transition, it is a prime example of the hard sell for independent programmers.

More Bang for the Bucks

For independent networks, the need has never been greater to not only be fleet of foot when it comes to changes in the market and in viewing habits, but to be able to give operators opportunities through online and on-demand content to make more money.