2004 Annual Report - Cable TV Economics

Cable channels sometimes complain that Nielsen's methods for measuring audience undercount the true audience. The reason for their irritation is that advertising rates are based on those ratings. Because their Nielsen audience ratings are so much smaller than the broadcast networks', cable channels are unable to command anywhere near the ad prices of the broadcaster.

On the other hand, cable, unlike broadcast, has two revenue streams, not one. In addition to advertising, cable operators and cable channels get revenue from subscriber fees.

The question is what happens if the cable universe continues to rise, while broadcasting continues to suffer. Should broadcast networks be paid subscriber fees by cable companies the way cable channels are? Isn't the ability to get the old networks in a clear signal a major attraction for viewers to buy cable? And if the networks were to rearrange their economic structure, would they invest any new revenue in news gathering? Or, because of audience trends, are they moving toward a point where they might get out of the business of providing a signature nightly newscast and sustaining a general news division and abdicate the role of basic news gathering to cable? If so, the content studies suggest the effect on television news quality might be devastating.