SNL Kagan Forecasts Strong Year for U.S. Cable Networks

MONTEREY, August 13:
Revenues at the U.S. cable networks were up 12.6 percent to $38 billion in
2007, according to a new report from SNL Kagan, with affiliate revenues
expected to continue to drive growth in the market this year.

In 2007, license fees for
cable networks were up almost 15 percent to $20 billion, while ad revenues were
up 10.5 percent to some $19 billion. For 2008, license fees, delivering nearly
50 percent of cable networks’ revenues, are expected to provide stability in a
weakened ad market, thanks to long-term contracts.

Ad revenues will be up
just 10.4 percent this year, according to Economics of Basic Cable Networks, with the forecast dropping to 4.7 percent in
2009, before recovering to 11.1 percent in 2010.

“This year’s weak economy
has resulted in extremely volatile ad markets with major advertisers scrambling
to allocate budgets where they will get the most bang for the buck,” said Derek
Baine, a senior analyst for SNL Kagan. “Companies that publicly report ad sales
for their cable nets showed positive second-quarter results spanning a wide
range from +1 percent to +28 percent. However, we expect to start seeing more
negative numbers in the second half of 2008.”

SNL Kagan’s ten-year
projections for cable networks show slow but steady growth trends, including a
1.3-percent gain in multichannel subscribers—half the rate seen between
1998 and 2007. Total industry ad revenue is expected to increase at an annual
rate of 8.1 percent, slower than the 11.6 percent posted over the previous
decade. Overall revenues are projected to rise 8.9 percent per year, with
affiliate fees decelerating to a growth rate of 9.5 percent per year over the
next ten years versus a 16.1-percent growth rate over the previous decade.

—By Mansha Daswani