Report: How Disney Channel offset a 12% ratings drop with a 6% spike in pay-TV affiliate fees

Despite significant recent audience declines among cable's biggest programming networks, and a sudden dip in advertising sales, media conglomerates generally reported strong revenue growth during the second quarter.

How do they do it? Is it volume, volume, volume? Not exactly. According to a Hollywood Reporter analysis published Thursday, the trick has been rising affiliate fees from pay-TV providers, coupled with international revenue growth.

As THR notes, ratings have dropped appreciably for seven out of the top 10 most profitable cable networks over the last 12 months. Meanwhile, cable networks just collectively saw their upfront advertising revenue for the 2014-15 season drop about 4.7 percent to $9.7 billion, with competition from online programming, among other factors, beginning to take its toll.

However, culling SNL Kagan data, THR says Disney Channel's cash flow is up about 5 percent over 2013, despite a ratings drop of around 12 percent. USA Network (also up 5 percent in revenue), FX (up 4 percent), and MTV (up 3 percent) are also flourishing, cash-flow-wise, despite recent ratings declines.

How have programming conglomerates done this? Foreign expansion has helped. Discovery Communications, for example, said June 30 that despite a 2 percent drop in Q2 domestic revenue, international growth during the quarter was up 23 percent. Overall revenue was up about 10 percent for Discovery.

But the real driver has been growing affiliate fees. Despite its audience declines, the Disney Channel has seen its average pay-TV licensing fee grow from about $1.09 per subscriber in 2012 to a current level of $1.15, an increase of just under 6 percent. Meanwhile, 21st Century Fox says its affiliate revenue has increased 16 percent in 2014.

For more:
- read this Hollywood Reporter story

Related links:
AT&T says DirecTV deal will reduce programming costs by 20%
Small cable operators may be headed out, says ACA's Polka
NCTA's Powell fears sports programming costs could draw federal scrutiny

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