by Ben Munson
July 7, 2017
Cable networks are going to find it harder and harder to justify raising distribution costs for TV providers, according to BTIG analyst Rich Greenfield.
Citing contributing factors including secular decline in pay-TV subscribers and TV advertising, as well as “TV advertising softening as ratings fall off a proverbial cliff,” Greenfield said the next round of affiliate renewals will need to feature more flexible deals in terms of channel packaging for distributors.
Greenfield said in the past cable networks have pushed prices up by improving the content, offering better picture quality (HD vs. SD), giving access to on-demand content, enabling TV Everywhere for cross-device/out-of-home access and full-season stacking. He added that greater MVPD competition has given programmers more leverage. But soon, the other shoe may drop.
“As programming deals come up for renewal, we struggle to see what meaningful incremental value programmers can offer distributors, beyond mobile rights that have not already been granted. The negotiation now really comes down to simply pricing and packaging. Price could certainly continue to rise, but it is likely to be accompanied by increased bundling flexibility enabling distributors to create smaller, more attractive channel bundles,” Greenfield wrote.