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Niche nets siphon from broadcasters

Feb 25, 2002  •  Post A Comment

Cable cannibalization is a myth.
At least that’s what Turner Entertainment Networks President Bradley Siegel thinks. While conventional wisdom holds that the new niche cable networks are eating the broad-based outlets’ (TNT, TBS, USA, TNN and FX) share of audience, Mr. Siegel contends that niche networks are not growing at the broad-based networks’ expense, but rather at the expense of the traditional broadcast networks.
A “mythology” has built up over the past year that general entertainment networks are a “dying breed,” while the niche networks are cable’s future, Mr. Siegel said. The reality, he said, is that as broadcast numbers are falling, general cable networks’ household numbers are staying flat to slightly up, while the niche networks are growing by skimming the less desirable older audiences from the broadcasters.
“Our argument resonates with most major advertisers, who for a while were attracted to the novelty of the niche networks and … the ability to target a very specific audience,” Mr. Siegel said, “but when you start to lay that against the cost of trying to service all those niche networks and the actual reach of those networks,” it becomes “inefficient.”
Advertisers with which this argument resonates include McDonald’s, Procter & Gamble, Coca-Cola, Anheuser-Busch, IBM, the automobile manufacturers and the financial services companies, Mr. Siegel said.
“I do think the niche networks are growing more at the expense of broadcast than they are at the expense of their cable brethren,” said Tim Brooks, senior VP of research at Lifetime Television, cable’s household ratings leader.
The evidence is that the “the aggregate rating of the top 10 networks over the long haul tends to be a pretty steady total,” he said. “In the same period, the total ratings for cable have grown immensely, so it’s quite true that the growth of cable has been from the newer networks, the smaller networks, as opposed to USA and TNT.”
The aggregate prime-time rating for the top 10 basic cable networks did peak in 1998, and it has declined somewhat over the past four years, from an all-time high of 16.7 in 1998 to 15.0 in 2001, Mr. Brooks said. That high rating, however, was “inflated” by the popularity of wrestling on cable at its zenith, he said. Historically, the aggregate rating for the top 10 cable networks has fluctuated in the 14 to 16 range for more than a decade, while the number of ad-supported networks has more than doubled (from 22 in 1990 to 54 last year), according to Lifetime research.
“Everything comes, to a degree, at the expense of the broadcast networks,” said Steve Sternberg, senior VP, director of audience analysis, Magna Global USA. “Anything that’s new is going to nibble at the people who have the most to lose.” That notwithstanding, Mr. Sternberg said, the “lower-rated [cable] networks have started to cannibalize the higher-rated networks.”
Mr. Siegel, however, argued that the general entertainment networks are growing in the younger demos. According to a Turner analysis of Nielsen data, 78 percent of the 2001 audience growth among the five broad-based networks came from viewers under 50 years old, while 23 of 28 adult-targeted nonnews niches were flat or down in the 18 to 49 demo.
The network that has faced the niche-vs.-broad issue most directly is probably Viacom’s TNN: The National Network, which formerly was the niche Nashville Network. In the past year and a half, it has rebranded itself nationally and generationally. “We had incredible beachfront property, but the house needed fixing,” said Diane Robina, TNN general manager.
“What Fox was to the broadcasters in the ’80s, we are trying to do to the general entertainment networks, which is to super-serve a targeted audience, so while we all go after 18 to 49, my real filter and focus is … 25 to 34s,” she said. She, too, made the point that, “No one buys households. They only buy demos. … If I was the No. 1-rated network in households and my 18 to 49 was the lowest, my rear end would be kicked out of the building.”
Peter Liguori, president and CEO, FX Networks, also cites Fox Broadcasting when discussing the future of cable’s general entertainment networks. Fox “clearly went after a brand, clearly went after a specific tonal niche,” he said.
The best way to stop any potential erosion from niche networks is to establish an original series as appointment television, he said. “It’s the holy grail and … the single-most-important asset you have to have to negate being niched,” said Mr. Liguori, who is pinning much of FX’s hopes on the upcoming series “The Shield.”
“One of the things we’re going to be facing is not only niche, but hyper-niche,” he said, pointing to Fox’s Speed Channel challenging ESPN and Fox Sports for sports viewers.
As for the question of cannibalization and who’s eating whom, that “whole bowl of soup is kind of mixed [and] a little too murky to say,” Mr. Liguori said. “The networks that are going to continue to grow are the ones that are better branded, better originally programmed and better marketed. That’s really the challenge.”