Question for Someone Who Has Worked in Cable TV.

[Eric J in MN]

Jeff Jarvis writes:
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http://www.buzzmachine.com/index.php/2005/08/01/not-getting-it/

Not getting it
Read More: Exploding TV, Weblogs, media

I don’t get it. From the start, I would have thought that Current.TV would have been built to be seen by anyone anywhere. Why shouldn’t I be able to watch the stream online?
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My theory is that Comcast pays Current for programming, but would refuse to pay if people could watch Current online for free.

Anyone agree or disagree with my theory?

[Rosco T.]

1. Bandwidth for streaming costs MONEY... they may not have it to spend n/m

[RoyGBiv]

2. Hammer ...

Meet nail.

All stations, with the exception of some local channels and shopping netoworks, on cable are paid by the cable companies for the right to broadcast to their customers. Note the exceptions. Some local channels are not paid because they cannot justify the charge, since they broadcast for free. Shopping networks ... well, that's just lengthy advertising. And from there, you get into the cost justifications for a network broadcasting at all. If it can't make money, it simply won't. If offering a free signal costs more than projected advertising and other revenue, it's not viable.

[Eric J in MN]

3. How does total advertising revenue compare with

revenue from Comcast and other carriers?

[RoyGBiv]

4. Depends on the network ...

Understand, I don't work in the board room, so I don't see the actual figures. I just know the theory.

Generally speaking, advertising is the primary revenue generation tool of any non-premium network, but it's a complicated equation. I don't even know how to start explaining it without some serious spreadsheets and a background discussion of how various laws affect this. For our purposes here, a smaller, startup network without a huge parent company to support it is a different animal than a network like ESPN.

A startup won't make much, in terms of profit, from rebroadcast fees. It'll make enough to pay the bills, so to speak. The trick is in determining at what price point those fees allow for growth and increased revenue from advertising as compared with the costs of free broadcast and the potential growth in that direction. The goal is always increased revenue from advertising because that is the profit maker, if that's what you're asking.

They key in this particular situation involves what Rosco said. Broadcasting for free costs money to the network initiating the broadcast. With a charge to rebroadcasters, it can recoup those costs, but without it, it has to hope that increased viewership leads to increased advertising revenues to close the gap. At present, advertising on the internet does not generate as much revune as comparable advertising with networks broadcast though cable or satellite, so the audience has to be huge to compensate.

That's the extremely short version, and I would welcome an economist to come along and offer a much better explanation. I understand how it works intellectually, but I don't have the vocabulary to explain it well.