The four major broadcast TV networks in the US are CBS (
), NBC, News Corp's (
) Fox and Disney's (
) ABC. These networks reach a wide audience and have traditionally
relied on advertisement based revenue models. On the other hand
cable networks, like Time Warner's (
) Turner Broadcasting (which includes TBS, TNT, and CNN) typically
rely on both subscription and advertisement based revenue models.
Over the recent years, broadcasters have been losing audience to
cable networks and have struggled to sustain revenues.
However, the traditional features that have differentiated
broadcast and cable networks are beginning to vanish. How might
this impact broadcasters and cable networks? Below we examine this
transition and the potential long-term impacts on these
Is Content Beginning to Merge?
Cable networks have been able to grab rights to sports
broadcasting, a traditional broadcast stalwart, and add late night
shows to their offerings while increasing reliance on top broadcast
Moves by Time Warner's Turner Broadcasting are making cable
stations look very similar to broadcast networks like CBS and
NBC. TNT appears to be more aggressively pursuing broadcast
content, in addition to building its own. The cable network has
infused life into the police drama
that was previously dropped by NBC in 2009. TBS also signed Conan
O'Brien to host a late night TV show following a break down in
negotiations between O'Brien and the Fox broadcasting network.
Going forward, other cable networks could be compelled to follow
Business Model Convergence
Broadcast networks are increasingly pushing for retransmission
fees in addition to the traditional advertisement based revenue.
Reliance on an advertisement based model exposes these broadcasters
to fluctuations in weak economic times, evident from the past few
years. Thus, a dual revenue stream of advertisement and
subscriptions offers a lot more stability to the broadcasters.
Fox's move to charge Time Warner Cable to carry its programming
is a prime example of changing economics of broadcast networks.
Analysts also anticipate a jump in retransmission fees for
broadcasters like CBS.
These developments could indicate a trend towards greater
convergence of business models between broadcast and cable
Our Take… With Expanded Content, Cable Might Fill Empty
Spots and Challenge Broadcasters
Cable networks are known for their original programming and
typically produce fewer series than broadcasters. If they can
complement their targeted programming with content that fills empty
spots, like morning and late night shows, as well as increased
coverage of major sporting events, they could increase their edge
over broadcasters and gain greater audience share. Currently, no
individual cable channels comes close to the reach of broadcasting
networks, although cable tends to do well in terms of profit
margins. Complementing programming with content typically
associated with broadcast networks could further advance cable's
scale and reach.