Cable '04: Growing Pains

Which cable network is next in line to ascend to the grown-up table?More than 30 basic cable networks have reached the promised land of 84 million U.S. homes, most of them now household names and cash cows. Bubbling under this top tier is a stratum of medium-sized networks, defined here as between roughly 40-60 million homes. From this unruly class of overachievers and wannabes will come the next generation of cable biggies. Every network in this set will grind out more subscribers, though few will reach the full monty of 84 million. Breaking through to viewers, advertisers and cable operators becomes more and more a game of finding that distinctive hit, of upgrading and refining the schedule, of feeding the brand. In the coming upfront, the big shots of basic will bang on the table for a heftier slice of the advertising pie. They may well get it—and, if so, the mid-tier class will share in the spoils, say media agency execs. "If there is a shift of money to cable," says Peter Butchen, senior vp and group director at Initiative Media, "that's good for every cable network, because you have the chance to write more dollars. You'll never get huge ratings [from the mid-tier nets], but most of them are viable alternatives for our media spending. They all make sense for somebody. And they're all one hit away from getting on the map."The good news for advertisers and their media agencies is that mid-tier nets are usually "malleable and tractable," says one veteran buyer. "If you have new money, you can establish a low base. They're great for negotiations, giving you price leverage with the bigger guys. They're usually extremely targeted, they look good on a buy, they're eager to please in terms of bells and whistles, and they're a lower out-of-pocket cost." The bad news is that audiences are often microscopic. For that reason, John Rash, senior vp/director of broadcast negotiation at Campbell Mithun, is not ready to hand over a blank check just yet. "To the degree that their pricing reflects their ratings reality," he says, "they can and indeed may benefit." The mid-tier nets trot out research showing strong concentrations in target demographics, longer length of stay and high viewer interest in their channels. "It's what they've got to sell," Butchen says, "but nothing can overcome the fact that they're a 0.1 rating instead of a 0.4."Relative lack of distribution is not such a problem these days, as everyone learns to live with smaller numbers. "A lot of clients won't consider a 30 million-home network," says Butchen, "but as broadcast ratings go down, that threshold evolves. Clients drop that 'It's got to be in half the country' criterion, and if a show is just perfect for their brand, all rules go out the window."Mid-tier nets try to price themselves in comparison to an established cable competitor. "If you're a Speed Channel, you say, 'Give us some of your ESPN money and we'll give you a deal,'" according to one buyer, who figures mid-tier nets receive about 80 percent of the top tier's CPM, though the gap could be wider for general-entertainment nets. Stand-alone networks such as GSN, Hallmark and Oxygen are at a relative disadvantage to, say, a Viacom-owned network that gets to see all the market action. Smaller siblings such as MTV2 or ESPN Classic are easily packaged with their more expensive big brothers—especially in a seller's market. "When buyers are desperate to get a percentage point off their CPM, they'll say, 'OK, give us some Discovery Health,'" acknowledges this buyer.Media specialists are sanguine about the prospects of these nets, expecting further growth and success from the group overall. That said, nothing here looks like a slam-dunk breakout. The networks most often credited with a frisson of ratings momentum or buzz are Hallmark, Oxygen and Lifetime Movie Network. GSN and National Geographic are in fascinating transition, as is Tech TV, further down the food chain. But everyone's got a story—invariably, in cable, a happy one.Hallmark has made the greatest ratings strides of any mid-tier network, rising more than 50 percent in households in each of the last two years. In recent months it has cracked the top 10 cable networks on a total day basis, thanks primarily to the evergreen M*A*S*H, airing four hours on weekdays, with Touched By an Angel anchoring prime time at 8. Monthly original movies such as Just Desserts with Lauren Holly have made some noise, while chestnuts such as Bonanza and Perry Mason round out the daily schedule. Not surprisingly, Hallmark tends to skew quite old, though demo ratings have risen and average age has dropped. Competitors cite its older profile and relative lack of original programming in questioning whether the channel can truly become one of the elite, but advertisers are happy. "It's a real wide network, a viable alternative for the clients who buy TBS and USA," says Butchen. Hallmark declined to participate in this story because it eschews the mid-tier label.Near the top of the heap in number of subscribers are three sports-related services, Speed Channel, Golf Channel and Outdoor Life Network. Speed, a unit of Fox Cable, focuses on "America's love affair with the automobile," says Richy Glassberg, senior vp of ad sales. The network offers a heavy dose of programming built around weekly Nascar Nextel races (airing on Fox or NBC), with qualifying races, a live Friday night pre-race show named Trackside and post-race commentary. It airs motorcycle, truck and Formula One racing, a weeknight live call-in show (Wind Tunnel) and how-tos. Overall ratings have been flat, but Glassberg points to 0.7 for Friday afternoon qualifiers. "It comes back to that passionate audience," he says. "We own that by owning motor sports."Comcast's OLN focuses on "the drama, escapism and competition of outdoor sports," says Gavin Harvey, the net's newly installed president. Its premier property is July's Tour de France, boosted this year by Lance Armstrong's pursuit of a record sixth title. Another up-and-coming sport, says Harvey, is bull-riding—recent 0.7 ratings on Sunday have been competitive with hockey on cable, he notes. The net has picked up the extreme sports competition Gravity Games and also offers hunting, fishing and a fish-out-of-water series named Samurai Sportsman. "I like our category versus a single pursuit like racing," says Harvey. "It's too big to be called a niche." But analysts warn that this could be Armstrong's last hurrah, and there are plenty of extreme sports on the dial."The demo we deliver is very unique and very prime," says Golf Channel president Dave Manougian. Top-rated, naturally, are tournaments; there's also news, how-to (Monday nights, after a hard weekend on the links), talk shows, biographies and the like. While Golf doesn't receive daily ratings, its monthly prime-time average hovers at 0.1. "Our advertisers buy us to be in front of this audience on an ongoing basis," Manougian says. Young male numbers are surprisingly good, with an average age of 48, belying golf's old-guys-in-plaid-pants image. "We're not selling prime rating points," he adds. "We want it always to be niche—not tiny, just not mass."While these male-oriented networks are strictly targeted, the three mid-tier women's nets are broader. After much zigging and zagging, Oxygen—long positioned as hipper than Lifetime—is developing a Sex and the City-type voice with sex-talker Sue Johanson and Girls Behaving Badly. More titillating shows are on tap, including a home-makeover series titled Nice Package and an original sitcom, Good Girls Don't, from co-owner Carsey-Werner-Mandabach. Still, the net's top performer is a second run of The Ellen DeGeneres Show. "Relatively speaking, there's growth, but it's coming off such a low base," notes Rash.Kathy Dore, president of Cablevision-owned WE (Women's Entertainment), says her network aims to "target women's passions and interests, and be relevant to their lives. We've always had the passions and interests—now we're adding the relevance." Consider the makeover of original series Full Frontal Fashion from model-centric to "a more accessible format with tips on how to create your own style. That in a nutshell is what you'll see WE increasingly do." She promises three to five new series later this year, starting with Take My Kids, Please!, a reality comedy about clueless babysitters. Meantime, the schedule leans heavily on well-worn theatricals, and many observers believe the net's image is underdefined. "I think the identities of all three women's networks are pretty distinct," says Dore.LMN is leaving its rivals in the ratings dust. Rick Hastings, evp of Lifetime Entertainment Services, points to a 20 percent prime-time gain in women 25-54 versus a year ago. "We're delivering to women what they want," he says. "The other networks are focused on entertaining women, but we're striking them on an emotional level as well." The channel's mix is about 25 percent theatricals, the rest made-fors, with acquisitions bolstering Lifetime's library. Decades of built-up equity in these flicks make for a nice business, but observers wonder if it constitutes a top-shelf brand. "Among women, we're already a top 10 basic-cable net in our universe," says Hastings.Trying to lure younger audiences, the rechristened GSN is stepping away from its game-show heritage. "It's a bigger idea to be the network about games than about game shows," says president Rich Cronin, who has broadened the network's brief to include reality games (The Mole), video games and casino games. New shows include Fake-A-Date and World Series of Blackjack. "We kicked ourselves that we didn't have poker first," says Cronin. He touts the net's 84 hours a week of interactive play, saying it keeps his viewers involved and tuned in to commercials; Burger King used an interactive spot to test a chicken sandwich. One buyer believes GSN is forsaking a proven if older audience for a trendy and unreliable one, noting that reality and casino games are available elsewhere. "We're gradually transitioning," responds Cronin, noting that game shows still comprise 90 percent of the schedule.National Geographic Channel, two-thirds owned by Fox, has reached nearly 50 million homes in just three years and is already profitable. Yet president Maureen Ong is pushing the channel to be younger and more dynamic. "We're talking to new enthusiasts, lifestyle people," she says. "Our brand should be daring, suspenseful, adventurous. We're not just lions and tigers and bears." New shows include Interpol Investigates and Naked Science, the latter a CGI look at killer asteroids, aliens and other pressing matters. Ong points to double-digit ratings growth this year—recent special Most Amazing Moments earned the net's biggest number ever—and a decreasing median age. One buyer thinks it's a mistake to go younger and hipper when "they've built this wonderful brand by playing it straight," but Ong replies that the parent society expects the channel to contemporize the brand.G4, now in 15 million homes, will vault to 44 million following the close of parent Comcast's purchase of Tech TV in March. The new net will combine G4's videogamer slant with the latter's technology focus. "It's all about gear, gadgets, guys and games," says Dale Hopkins, senior vp of advertising and affiliate sales. "People in TV ask, Where have all the young men gone? They're watching cable and playing videogames." G4's top performer is G4TV.com, a talk show with two gamer hosts who field online questions. There's also Pulse, a weekly news show, and Players, with musicians and athletes showing off their gaming chops á la Cribs. In advertising, "brand leaders have taken a chance on us," says Hopkins, citing Levi's, P&G, Honda and Coke, among others. Sibling channels, too, strive to carve their own identities. Says David Cohn, general manager of all-music-video MTV2, "Our challenge is finding a distinctive voice so we can break through, and it is the voice of music." All-hip-hop Sucker Free Sundays is a solid draw, while indie-focused Subterranean garners cred. "Our audience is the 12-to-34 early adopters who are voracious about TV, videogames, the Web, fashion, anime—all things that are seamless with music culture," says Cohn. "Yes, the net is usually packaged with MTV for ad sales. "I'll take that as a compliment, but we do have to find those must-buy franchises."ESPN Classic is pushing to become more than a repository of old games. Docu series Sports Century carries the torch. "No one tells better sports stories," says Crowley Sullivan, the net's director of programming and acquisitions. Classic Big Ticket wraps old games with commentary and anecdotes from players and coaches, much like a director's-cut DVD. And Sullivan points to the new Cheap Seats—wherein a couple of sports nuts screen vintage events and comment on announcers, graphics and playing styles in the style of MST2K—as "a perfect example of how we're expanding our programming to appeal to more viewers and advertisers." Meanwhile, ESPNEWS has added program blocks such as The Hot List, a sports news countdown, but Rash notes that "the ubiquity of sports-news on cable and local channels limits their ability to grow significantly."In marked contrast to all these niche programmers is Superstation WGN, the Tribune-owned powerhouse. It's an old-fashioned, broad-based net, chock-full of sports (Chicago's Cubs, White Sox and Bulls), a 700-title movie package and sitcoms such as Will & Grace and Becker. Butchen praises WGN's "very successful, solid programming," though he wishes distribution were a bit more even. Says president Bill Shaw, "We've got a little something for everyone. You can keep a loyal viewer with the programming we have." Eric Schmuckler is a contributing writer to Mediaweek.

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Cable '04: Growing Pains

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