Why Cable Is King Of the TV News Hill

By Alex Weprin 

This weekend the National Journal ran a story highlighting CNN’s business success, noting that the Time Warner-owned cable channel had its most profitable year ever in 2009, and was on track to top it in 2010. This despite a poor ratings performance in primetime on the flagship network.

While the focus of the story was on CNN, the real takeaway should be the business models of CNN, MSNBC and Fox News. Models that have allowed them to thrive while their broadcast counterparts struggle.

The cable channels last year drew around half of their revenue from subscriber fees. Also called carriage fees or affiliate fees, they are a monthly fee paid the channel by consumers through their cable, satellite or telco operator.

Those fees offset advertising revenue, which took a hit in 2009. While the advertising decline hit all three cable networks hard, the subscriber fees actually grew on the three news channels: 5% for CNN, 6% for MSNBC and 16% for Fox News according to SNL Kagan.

When you pay your cable bill, an average of 48 cents goes to CNN/HLN, 49 cents to Fox News and 16 cents to MSNBC.

Compare that to the broadcast networks, which rely almost exclusively on advertising revenue (though they are making an effort to secure a cable-like revenue stream in the form of retransmission consent fees).

In today’s New York Post, Claire Atkinson writes that CBS and ABC are likely to be put on the block this year. It is no coincidence that the news divisions hit hardest by layoffs over the last year have been CBS News and ABC News, which do not have the benefit of a strong cable news channel to help offset their revenue like NBC News does. ABC News does have a digital news channel, ABC News Now, but it is not a big revenue driver.

The bottom line is that from a business standpoint, and when compared to the larger television landscape, the cable news channels are doing great, even when their programming is not. How long they can keep it up is the real question. Higher subscriber fees are hardly a guarantee, with more and more networks jostling for a bigger slice of the pie. Consumers will only put up with ever-increasing cable bills for so long.