Two things happened over at Time Warner cable last week. One got a lot of attention but the second went pretty much under the radar.
The first thing to mention is Time Warner Cable finally signing to carry the NFL Network. TWC was the last holdout among the major cable companies in the US. Why did they hold out so long? Because the NFL Network is pretty damn expensive. We are talking about adding over a dollar in rights costs. Is TWC going to raise their prices? Probably not because they are already changing a premium to their digital tier customers. So the costs for the NFL Network will be coming right off the bottom line for TWC.
That's a situation that won't last.
Which gets me to the second thing I wanted to mention. Last week Jeff Bewkes, the Chairman and CEO of Time Warner made the following comment (which could easily be properly called a complaint), "About 17% of TV viewing occurs outside these [top] 40 channels, and $7 billion [in rights fees] goes to those channels." The comment was made at a Goldman Sachs investment conference and the inference was clear - companies like TWC are paying way too much for channels nobody is watching!
My guess is that to cover that dollar plus for the NFL Network - TWC will start shedding smaller niche channels. It will probably take five or six channels to make up for the costs added by the NFL Networks. I'd hate to be the sales rep for a smaller channel whose contract is coming up with TWC any time soon. Those will be the first to go.
The cable landscape has been a non-stop history of adding channel after channel for larger and larger line-ups. I think the wave has crested and that we are about to enter a period that for every channel added a couple will be dropped. Last week may be remembered as the week TWC added the NFL Network but long term it may be remembered as the point in time that the channel line-up started to shrink.
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