If one thing marked media holding companies’ summer earnings reports, it was the big jump in revenue from their cable networks—with a major factor behind those jumps. “It’s not subscriber growth driving the numbers. It’s more [carriage] revenue,” said Jessica Reif Cohen, a media analyst with Bank of America-Merrill Lynch, about the renegotiations over affiliate fees—the chunk of cable subscription revenue paid back to content owners.
As entertainment networks ramp up spending on original productions and acquired series, the owners are covering costs by raising fees. Meanwhile, former startup networks that are now established are also commanding more money from the companies that distribute them.
News Corp. is a prime example. Its cable networks reported a 12 percent yearly uptick in operating income—$631 million—with quarterly affiliate revenue growth of 7 percent domestically and a staggering 30 percent internationally. Justifying the higher programming costs at FX and renewals of Fox News affiliate deals accounted for much of the jump. “Now that [Fox News] ratings have significantly improved . . . the cable operators are being asked to pay extremely significant increases,” said Tuna Amobi, a media analyst with Standard & Poor’s, about the latter.
Viacom’s networks—home to MTV’s ratings juggernaut Jersey Shore—raked in some $2.4 billion in revenues, an increase of 16 percent. “They’ve benefitted from better ratings” as well as affiliate fee rises, said Cohen. Indeed, Viacom saw worldwide affiliate revenues totaling $971 million—a 19 percent increase.