On Current TV Biz

When It Comes To Television Content, Affiliate Fees Make The World Go ‘Round.

"From a cost accounting perspective, a studio should allocate these fees across the content development costs, and therefore, they are not explicitly 100% GM. But as there are no significant variable costs related to the deployment of these programs to the carrier, most content owners cannot help but think about affiliate fees as 100% gross margin and therefore the key contributor to overall profitability.

"If you own a cable channel, your goal is to develop one or two key, hit programs, and fill the rest of the linear lineup with very inexpensive content. The “hits” make you a “must have” for any cable or satellite carrier – granting you the right to ask for fees."

"Why would a cable distribution network want to own content? First, it’s a hedge against rising content costs (affiliate fees). Second, it offers leverage vis-ŕ-vis their competition."

"Why earn your customers one by one when you can get to mass volumes, and a fixed amount of recurring revenue, through a distribution partner?"

"The fox isn’t just guarding the henhouse, he designed it."