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July 21, 2011
Turner Networks announced that it has begun streaming of CNN and its sister channel Headline News to computers and iOS devices. Turner's move to bring a live linear feed to smaller screens is the first to be made by a US cable network owner. This practice is more common in other parts of the world where news channels such as Sky News and Aljazeera have been streaming their live feeds to smaller screens for years.
The CNN Live streaming service is available only to paying TV subscribers who receive their service from a partnering provider. So far, Comcast, DISH, Cox,FiOS, DirectTV, Suddenlink and U-verse have signed up for the live streaming service. Users are required to authenticate using login credentials provided to them by the operator. CNN reported only two days after it debuted the service that, to date, all their CNN apps across all devices have been downloaded ten million times.
Initial reports are circulating that bemoan the fact that separate authentications for the CNN app and HBO Go apps are required.
The move by Turner Networks to provide live streams of CNN and HLN is a defensive move to counter the growing tide of households which get their news from alternative outlets. Secondly, by working directly with the distribution partners, Turner Networks hopes to shore up its relationship with them during these times of uncertainty. Rights to linear content on TV Everywhere platforms resembles the positions of many cable network-owning conglomerates whom also owned local O&O (owned and operated) Television stations.
In the late nineties and early noughties, the majority of cable network owning media conglomerates offered their portfolio of local stations on a free basis to pay TV operators as a carrot to get carriage for their newly launched digital networks. Unlike other major cable network-owning conglomerates, Time Warner doesn't have a significant local television station business, but by offering up CNN and HLN to the TV Everywhere gods, it is in a position to continue to grow carriage fees for its cable networks.
IHS Screen Digest estimates that domestically in 2010 Turner Networks brought in $6.75bn in total revenues across its suite of eight channels. Of its total revenue, carriage fees made up 56 per cent of total revenues. The move to provide the linear real-time feeds of CNN and Headline News is pre-emptive, attempting to secure continued growth for its carriage fee business, as it comes under pressure from OTT (over-the-top) content, and local station retransmission fees.
We have commented in the past that the television business is caught in a negative feedback loop between consumers, pay TV providers, cable networks and broadcast stations, to the ultimate detriment of programming diversity. As content owners seek to maximise profits, the burning question is how much the average pay TV subscriber is willing to bear.
The average pay TV household in the USA currently pays $72.55 per month for video service, as ARPUs increase to $75.96 next year, and on to $84.27 in 2014, it is logical to expect that low-price alternatives will lure subscribers away from their traditional pay TV subscriptions.
From 2000 to 2010 the US cable network industry grew total revenue at a 9.42 per cent CAGR, largely on the successful negotiations for increased carriage fees which grew at a 11.75 per cent CAGR in the same period. At what point will the pay TV industry recognise that growing revenue at these rates is no longer feasible while attempting to maintain current subscriber levels, even if additional perks such as TV Everywhere are offered?
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