Analysis: Cable Carriage And Fees Will Be Tough Slog for ABC and Univision Channel

By Alex Weprin Comment

For ABC and Univision, the hard part is just beginning. Once all the backslapping and self-adulation is over, the two companies have to get to work not only building a new cable TV network, but getting other companies to carry it–and pay them for the privilege of doing so.

As we noted earlier, the deal is predicated on a “major” cable operator signing on to carry the channel, so finding the right partner is crucial. Univision announced in January that DISH network was on board to carry three new cable channels, one for sports, one for telenovelas and one for news. DISH may be a logical satellite launch partner for the new channel.

Comcast would be another logical partner. While it is not compelled to carry the new channel due to the NBCU deal (because the new channel is owned by Disney and Univision, it is not considered “independent”), Comcast has increasingly been seeking diverse networks to add to its lineup.

Launching a new channel is incredibly hard, and there is no clear measure of success. Typically reaching 40 million households is considered the “Nielsen barrier” at which point networks will seek to be rated by Nielsen, but that doesn’t apply across the board. Spanish-language networks like MTV Tres and Mun2 have far lower carriage than their English-language counterparts, but argue that they still reach a significant number of Hispanic households.

Considering there is still a year or so until the TV network launches (it will launch online this year), neither company should be in a rush to get wide carriage. They should however be concerned with getting the channel into the right households.

Unfortunately, because they are launching fresh, and not taking over existing channel space (i.e. OWN taking over Discovery Health), gaining that carriage will be a long, tough battle. Expect ABC and Univision to try and use their existing channels as leverage.

Then there is the issue of carriage fees.

This is the reason why ABC was so eager to get into this joint venture. Don’t let all the talk about reaching the fast-growing Hispanic market fool you. ABC has been looking for a cable partner for a long time (remember the Bloomberg talks?) and Univision was able to make it work. ABC News wants a piece of the carriage fee pie, to help amortize the very expensive process of covering the news.

Spanish-language and Hispanic-targeting networks run the gamut, from a few cents per subscriber per month (MTV Tr3s) to around 20 cents per subscriber per month for Spanish-language sports channels (Fox Sports en Espanol). Considering the ABC and Univision pedigree, expect the company to be asking in the 10 cent range, enough to drive some real revenue if it gets distribution, but below the “sports premium,” according to one cable executive.

Ultimately, the market will decide what the right fee is. This channel clearly has grand ambitions, but many channels do. It is what you do with those ambitions that generate value.