Time Warner Cable plans to drop the small Santa Monica-based channel Ovation from its programming lineup at year's end -- a blow to the independent network that has attempted to elevate TV coverage of the arts and contemporary culture.
The nation's second-largest cable television provider said its decision came down to simple economics. There hasn't been enough demand for the channel, which was seeking a modest rate increase when negotiations over a new distribution agreement stalled several months ago.
“Steeply escalating programming costs are forcing us to closely assess each network as it comes up for renewal,” Time Warner Cable said Tuesday in a statement. “Ovation is among the poorest performing networks, and is viewed by less than 1% of our customers on any given day.”
Cable and satellite TV operators are struggling to contain programming costs amid demands for huge fee increases by sports networks, including two new Los Angeles-based channels launched this fall by Time Warner Cable.
This month, Time Warner Cable Chief Executive Glenn Britt said his company was going to get tough when negotiating new deals with low-rated channels. Rising programming costs have prompted cable operators to begin weeding out weaker networks.
“Most cable networks are owned by a major media conglomerate that has significant leverage during these contract negotiations,” said Derek Baine, cable analyst for consulting firm SNL Kagan. “If a channel doesn't belong to one of these big companies, then they are at much higher risk of getting dropped.”
Ovation fits the profile. The 6-year-old channel -- available in about 51 million homes -- is owned by a group of investors, including Hubbard Media Group, Arcadia Partners, Perry Capital Management, Corporate Partners II, the Weinstein Co., and two longtime TV programming executives, Ken Solomon and Charles Segars, who also is Ovation's chief executive.
“We would love to re-engage in negotiations with Time Warner Cable,” said Brad Samuels, Ovation's executive vice president of content distribution. “We hope that they will reconsider and we hope our viewers and fans will voice their concern about losing the only arts channel in the country.”
In recent years, Ovation had increased its reach from 7 million homes to its current base of 51 million -- about half of the households in the U.S. with pay TV subscriptions. The network added several major advertisers to its roster to bolster its programming budget, estimated at about $15 million a year. Just this summer, Time Warner Cable seemed committed to Ovation, adding the channel in high-definition to more homes.
Cable companies pay Ovation about seven cents per subscriber per month, according to SNL Kagan. That compares with more than $5 per subscriber per month for ESPN, owned by Walt Disney Co., and about $5 per subscriber per month for two Los Angeles-based sports channels, Prime Ticket and Fox Sports West, both owned by News Corp.
Time Warner Cable two months ago launched its Time Warner Cable SportsNet and Deportes, which carry the L.A. Lakers. The company asked pay-TV distributors in Southern California to pay nearly $4 per subscriber per month for the channels.
“We regret that the economics of the pay television industry have come to this, but we can no longer burden our customers with costs for low-performing networks,” said Time Warner Cable.