The Oprah Winfrey Network (OWN) is to make its debut in January 2011 in 75 million homes, replacing Discovery Health Network. But come January 1, whether the new branding and programming can increase the subscriber fees the channel takes from cable and satellite operators remains a question.
The new network, a joint operation by Discovery and Winfrey, will replace the beleaguered Discovery Health Network. Currently, Discovery Health receives the lowest license fees of any of Discovery's 13 cable networks. Screen Digest estimates that Discovery Health brought in an average of $0.05 per subscriber per month in 2010. It receives no fees at all from certain subscription television operators.
OWN will replace Discovery Health, and that is only good news for the struggling network. Cable and satellite operators have generally carried Discovery Health in their upper tier packages, available to a fraction of the operators' subscriber bases. As a consequence of this and the low per-subscriber fees, carriage fee revenues have been minimal for the network while advertising revenues impacted by the lower household reach. With Discovery Healths' subscriber fees already near rock bottom, there is significant room for the Oprah brand to drive an increase in carriage fees from distributors. Similarly, advertising revenue has the potential to pick up as a result of the rebranding and the expected audience gains.
The dual revenue streams of advertising and carriage fees have become well established in the cable industry and are essential to the success of the Oprah Winfrey Network. The hurdle of bringing in new advertisers is already off to a great start with Procter & Gamble committing more than $100 million to advertising on the network over three years and as OWN approaches its debut, more advertisers will likely follow suit.
Screen Digest estimates total ad revenue for Discovery Health to have reached approximately $69m for 2010. With OWN's impressive start in attracting advertisers, Screen Digest sees ad revenue increasing from this level by almost double digits. OWN is picking up momentum as it nears its launch, but now it needs to show why it is worthy of attracting higher subscriber fees. Winfrey has already proved her dominance on television, but in order for OWN to succeed, she will need to bring compelling new ideas and shows to the network. Regardless, with Oprah's enormous fame and brand, both Oprah and Discovery are betting that OWN will be of significant value to cable and satellite operators and that this fact will carry weight during new carriage negotiations.
As Oprah joins the program schedule full time next fall and with the new network likely to attract several high-profile personalities to help fill its schedule, Screen Digest estimates that by 2012, OWN will have succeeded in negotiating carriage fees of approximately $0.20-$0.25 per subscriber per month.
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