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Sale of Current TV Ratchets Up Pressure on Small Channels -- Is Move an Omen of Shrinking Cable Universe? THR

The sale of Al Gore’s Current TV to Al Jazeera, followed immediately by the ouster of the channel from the Time Warner Cable lineup, as we reported previously, has little-viewed networks feeling the heat, television writer Alex Ben Block writes in an analysis piece in The Hollywood Reporter.

Ovation was also recently dumped by TWC, while Reelz Channel has lost $100 million since its 2006 launch, the piece notes. Increasingly, distributors are questioning the wisdom of carrying large numbers of channels.

“Cable television is undergoing a shift away from the era in which the goal was the 500 channel universe,” Ben Block writes. “It is a sea change in the media landscape that could impact not just Current and Al Jazeera but dozens if not hundreds of medium sized and small channels, most of which are independently owned and distributed.”

Time Warner Cable has said it is contemplating scrapping more than 50 other channels, including E!, Encore and Lifetime, the piece notes. “The message might be a negotiating ploy to get lower sub fees, but there is little question that television distributors are re-evaluating how they do business as the cost of programming soars,” Ben Block writes. “Rising sports rights fees, as well as increased program costs and demands from broadcasters such as CBS and Fox for sharply higher retransmission payments, are to blame.”

Said cable industry consultant Steve Effros: “For a long time, it was a question of how many channels you could offer a consumer. That is now changing. We have reached a point of diminishing returns because the Internet offers an infinite number of channels.”

The change reflects shifting priorities for cable companies, which no longer care as much as they once did about selling video services.

Vasily Karasyov, senior media analyst at Susquehanna Financial Group, said: “They want to sell high-speed Internet and phone. What they care about is, ‘If I don’t have this channel, will I lose video subscribers to whom I can upsell other stuff?’”

An increasing number of channels are finding themselves endangered, the piece reports.

“In the case of Current TV, the loss of Time Warner Cable means its reach into American TV homes drops from about 60 million to less than 48 million homes,” the piece reports. “That means it will lose its subscriber fees from TWC of about 12 cents per customer each month, which Karasyov says it was able to command only because of co-founder Al Gore’s projections at the time. Those ratings promises have never been met, while the cost of doing business goes up and up.”

Says Karasyov: “If you’re an under-distributed network and you’re not part of a conglomerate, or if you are another small independent channel, you’re scared right now.”