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Cable networks are TV's biggest stars

Technology and competitive advantages have been game-changers for premium-tier outfits such as HBO and Showtime and basic-cable's FX and AMC.

September 30, 2012|By Scott Collins, Los Angeles Times

"If you're a broadcaster, every single half-hour is worth so much to you that you're losing money hand over fist if you're not maximizing revenue wherever you can," said John Landgraf, president of the FX cable network.

DVRs, now in about half of American TV homes, are allowing networks to claim viewers aggregated over several days and multiple airings rather than just on premiere night — even though many executives worry that the device's ad-skipping functions are slowly strangling the business. The basic-cable networks also get a far greater share of income than broadcasters do from subscriber fees paid by local cable operators

And the cable outlets cut corners where they can: FX shells out less than $500,000 per episode for "Louie," the edgy comedy starring Louis CK. That covers the stand-up comic's salary as well as all production expenses. On a big network sitcom, that type of bare-bones budget wouldn't even get the entire cast to the set: "Big Bang Theory" pays a reported $300,000 per episode to Kaley Cuoco, just one of its three major stars.

The huge growth in overall programming doesn't appear to be crimping profits at cable networks such as FX. The News Corp.-owned network will spend $455.8 million on programming this year, up 25% compared with 2009, according to media research firm SNL Kagan. And yet FX is expected to log earnings of nearly $625 million this year — proving the power of those subscriber fees to push cable firms into the black.

But cable networks also have a dirty little secret: In an industry notorious for tossing around huge sums of money, niche programming is not a get-rich-quick path.

"Almost no shows on cable are profitable in and of themselves," Landgraf noted.

Does that mean they're not worth doing? Not at all.

Instead, all those Emmy-winning shows serve as loss leaders that attract more attention to the network — hopefully boosting viewership, advertising and subscription income along the way. There can be a lot of money in relatively small audiences — and no one knows that better than CBS Corp. chief Leslie Moonves, whose responsibilities include oversight of Showtime.

At an investors' conference last month, Moonves waxed enthusiastic over the growth possibilities for the pay network.

"They've gone from 13 million [subscribers] to almost 22 million over the last five or six years," Moonves said. "Showtime … is much hotter than it ever was because of their programming."

He added that Showtime, home of "Homeland," would rake in $750 million in profit this year.

"That's quite a nice growth story," he said.

scott.collins@latimes.com

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