General Entertainment Programmers Pull Out the Big Guns

Why more cable networks are targeting large audiences with aggressive investment in more scripted fare 4/01/2013 12:01:00 AM Eastern
RELATED: Landgraf: 'Go Big or Go Home'

General entertainment has become the place to be if you’re
a cable programmer. At a time when cable operators and other
distributors are looking at their costs and viewers are considering
cord-cutting and watching whatever they can find on the
Web, more networks are pushing to create big-ticket scripted shows, possibly
turning the smaller niche channels that originally defined the cable
industry into endangered species.

Last week, FX Networks president John Landgraf announced that the News
Corp. unit is launching the general entertainment network FXX that will aim at
18-to-34-year-old viewers with scripted comedies now and dramas in the near
future. FXX will be part of a suite of three networks—along with FX and the movie
channel FXM—and Landgraf said he plans to fill that suite with 25 scripted shows
per year, or about the same amount as the traditional broadcast networks produce.

CBS, which just bought 50% of the TV Guide Network for about $100 million,
might also look to tap CEO Leslie Moonves’ golden touch with programming and
push into the general entertainment cable space. Newcomer Participant Media
also said it was creating a network, Pivot, aimed
at millennials. While planning new spins on traditional
TV genres such as dramas, talk shows, reality
shows and even variety, Pivot president Evan
Shapiro declared his channel was in the general
entertainment game.

Everybody Wants to Get Into the Act

Many other channels have been looking to move
more into the general entertainment category, and
nothing creates a bigger bang with both distributors
and advertisers than scripted shows. Viacom’s Spike
is moving more toward general entertainment with scripted shows in development.
History Channel’s scripted The Bible and Vikings were among last week’s highest-rated
programs in all of TV, alongside The Walking Dead, which generated audiences
as impressive as the awards other scripted shows garnered for the once-obscure
movie network AMC. And with former FX and Fox chief Peter Liguori now running
parent Tribune Co., WGN America is pursuing a general entertainment strategy and
will eventually be looking for scripted shows to redefine the network.

Streaming video players such as Netflix and Amazon are starting to get into the
scripted game themselves, so established programmers are also building ways to
have their programming support the current ecosystem.

0408 Cover Story revenue chartWill the television
business support the
influx of more general
entertainment competitors?
“I don’t think
the world needs another
general market
entertainment channel
for the sake of reruns,”
said David Bank, managing
director of equity
research at RBC Capital
Markets. But Bank
adds, based on talks
with programming executives
at distributors
and affiliate sales people
at the programmers,
“If you could put on
differentiated content,
it would drive carriage,

It’s not just the NFL
that creates leverage
when a blackout threatens during carriage renewal talks. Bank said that if a program
develops a following of only 1 million or 2 million vocal viewers, that
translates into subscriber revenue. “Fan engagement with these cult-type shows
is enough to drive carriage and affiliate fee increases,” he said. “A show like The
Walking Dead
on a niche network drives carriage. So it’s about the content.”

Busy Marketplace

Putting money into cable programming has also become a better investment,
thanks to the streaming SVOD business. “What the digital distributors have
done—meaning Netflix, Amazon, Hulu and whoever else comes along—is they’ve
provided a syndicated marketplace for even those kind of funky serialized shows,
like [FX’s] The Americans,” Bank said. “Well, it’s a pretty good show. It’s getting
ratings and it’s probably going to have a life somewhere in digital syndication.”

Original content also helps cable networks increase the rates they charge for
advertising. At FX’s upfront presentation last week, media buyers said they were
impressed by the original content that will fill the three channels. Francois Lee, senior
VP at MediaVest, liked having more channels and more programming aimed
at 18-to-34-year-olds. “They’re so fragmented,” Lee said. “The more ways we have
to reach them, the better.”

CBS and its partner Lionsgate—which produces shows including Mad Men
have not announced plans for the TV Guide Network. In a statement, Moonves
said, “We’re excited to bring CBS’ programming and production assets to the
venture, and work with Lionsgate to rebrand and grow a channel that will be
increasingly valuable to our carriage partners.”

On Wall Street, analyst John Janedis of UBS said that paying $100 million-$125
million for TVGN’s 80 million subscribers was a bargain. “Given the content libraries
of both CBS and Lionsgate, the deal would appear to be a cheap way to
distribute their content,” Janedis said.

FX’s Landgraf expects Moonves to be a formidable competitor. “I wouldn’t bet
against Les,” Landgraf said. But the key question, Landgraf added, is, “How much are they going to be willing to spend” to program the channel? With a new channel,
“you have to put on better programming than your carriage really deserves.”

Beating the Broadband Drums

In a more competitive world, Landgraf said he thinks being big is a benefit: “It’s
better to be a heavyweight than to be a middleweight punching up.”

And in an environment where cable universe growth has stalled and operators
are looking to rein in
spending growth, Landgraf
said it’s important to
be a must-have channel.

“If and when there’s
any kind of shakeout in
the marketplace, it’s the
non-must-have channels
that are really going to
struggle,” Landgraf said.

David Levy, president
of ad sales, distribution
and sports for Turner
Broadcasting, is also a
fan of having networks
with heft.

“When we go into our
negotiations with our
partners on the distribution side, it’s nice to have the portfolio of brands that we
have and the strength of the brands that we have. We don’t have what we would
call a lot of niche, lower-tiered networks,” Levy said.

Levy noted that a lot of smaller networks were launched as part of transmission
agreements with big media companies. “Are they as needed as they were in the
past? That’s a question for the negotiators and their other media partners,” he said.

FX and Participant both outlined plans to address online viewing and support
cable operators. Participant will be available to consumers who subscribe to either
a video service or its broadband product. Shapiro said that its survey of millennials
found that while more than 20% were considering dropping cable, more than
20% of the broadband-only respondents said they were considering getting cable.

FX’s expanded program offerings will be made available on-demand to authenticated
cable subscribers and through operators’ video-on-demand services.

Original programming will be available the day after it airs and a Movie Bin
offering will put 40 movies a month on VOD that will not be available from a
streaming service, increasing the value of a cable subscription, Landgraf said.
“Our point of view is, let’s provide content, better content, better user interfaces,
more access, so at least if you’re paying for television you’re getting something
extraordinary, something special,” he said.

The VOD service is also an opportunity for advertisers who wish to grab viewers
watching movies on commercial-free streaming services or DVDs, Landgraf said, asking
media buyers, “If you could advertise on Amazon Plus or Netflix, would you?”

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