TV Networks to Benefit by Unbundling from Cable Packages?

Television networks are currently entangled in expensive negotiations with cable companies over retransmission fees and rights to stream content on other devices. However, if a TV network were to sell its shows directly online with a Netflix-like subscription, GigaOM speculates that the network could still remain profitable and consumers would not have to pay for expensive cable packages. This new model could potentially redefine content distribution via the Internet and television.

The proposition could work because TV networks are usually paid less than $2 per subscriber in their deals with cable companies.

AMC, for example, makes $32.6 million per month from retransmission fees to show in 99 million U.S. households. Because AMC attracts 10-15 million viewers for its “Breaking Bad” and “Walking Dead” series, it could possibly forgo a cable negotiation if each viewer paid a $10 per month subscription fee.

However, there are a few uncertainties in an unbundled cable package. First, most television networks rely on advertising. For AMC, advertising accounts for 45 percent of its revenue. Also, the fate of many other smaller networks, which are usually already included in cable packages, would be in danger because they do not have enough viewers willing to pay a subscription.

GigaOM suggests other methods of monetization for networks that may consider unbundling. Making a deal with consumer electronics to give viewers with a certain device exclusive access to the newest seasons of a show might be one option. A TV network may also try offering its channel, commercials and all, on a new Internet TV service or video site like YouTube.

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