09.30.10

The 25 Most Valuable Cable Channels

As the TV networks crumble, cable—with shows like Mad Men, Jersey Shore, and Burn Notice—has become the cash cow they once were. Peter Lauria ranks cable’s most valuable.

Today marks the end of the second week of the 2010 broadcast television season. But you can be forgiven for not knowing that, because it appears that many of you aren't watching new programs on the networks anymore. Fox has already canceled its highly touted serial drama Lone Star, and a number of its other new shows have gotten a tepid initial reaction—ABC and NBC are facing the same problem. Indeed, if you watch the Emmys, read the blogs, or simply listen to co-workers at the office, you know that almost anything worth paying attention to on TV is on cable—it's all Mad Men, Jersey Shore, Monday Night Football, and the Real Housewives of this or that city.

And because the buzzy shows are on cable, the value of cable networks has increased exponentially over that of their broadcast counterparts.

There are many reasons for why cable channels are worth vastly more than their broadcasting brethren. Chief among them is that cable networks benefit from two revenue streams: advertising and licensing fees (the payments distributors make for the right to offer the channel to their customers). Other factors include growth potential, amounts spent on original productions, and whether the network is independent or part of a larger group that can be bundled together and offered as a package.

Take Bravo, for instance. In 2002, NBC paid $1.25 billion to buy the cable network, and eight years later its value has nearly tripled to $3.2 billion, according to research firm SNL Kagan, making for quite a nice return-on-investment for NBC Universal. By contrast, a report issued by Wunderlich Securities on Monday pegged the value of the NBC network itself at a stunning negative $600 million. Or, to put it another way, Bravo is more than five times more valuable than NBC. Small wonder, then, that while NBC boss Jeff Zucker was shown the door last week, Bravo boss Lauren Zalaznick, along with USA Network head Bonnie Hammer—whose fiefdom is valued at between $10.5 billion and $18 billion, by Kagan and Wunderlich, respectively—are being eyed for major promotions once Comcast's takeover of the company closes.

Nor was it surprising that this summer Disney decided to install cable executive Paul Lee as the successor to Steve McPherson at ABC, adding his name to a small group of cable guys put in charge of a broadcast network (former Fox executive Peter Liguori and current Fox network head Kevin Reilly, both from FX, are two others). All it really amounted to was a logical business decision. After all, Lee helped grow ABC Family from a little-watched channel into a consistent Top-20 rated performer worth $3.3 billion, while ABC's value under McPherson's watch dwindled to one-third that amount, just $1.2 billion, according to Kagan and Wunderlich estimates. (It should be noted that ABC Family's value is still short of the $5.2 billion Disney paid for it in 2001.)

Gallery: The 25 Most Valuable Cable Channels

Using data supplied by SNL Kagan—and against the backdrop of the executive departures at NBC and ABC—we've compiled a gallery of the 25 most valuable cable networks. We excluded pay-TV networks such as HBO and Showtime, because those require consumers to subscribe to them individually, as opposed to networks like MTV or Food Network, which are widely available to consumers as part of a suite of channels offered on the basic or expanded basic cable tier. What we discovered is that not all cable networks, even ones with similar programming targeting similar audiences, are created equal. Nickelodeon is worth $17 billion, for instance, while the Cartoon Network is valued at only $3.4 billion. And CNN, doesn't rank among the Top-20 highest-rated networks but is slotted as the 12th most valuable at $6.1 billion. (CNN, not coincidentally, last week ousted boss Jon Klein primarily because of its lackluster ratings.) Moreover, while revenue and ratings factor into a network's worth, they aren't as highly correlated as one would think.

"Just because you are one of the top-rated networks doesn't mean you are one of the most valuable," says Derek Baine, SNL Kagan's senior entertainment analyst. Or vice-versa.

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Peter Lauria is senior correspondent covering business, media, and entertainment for The Daily Beast. He previously covered music, movies, television, cable, radio, and corporate media as a business reporter for The New York Post. His work has also appeared in Avenue, Blender, and Media Magazine, and he's appeared on CNBC, Bloomberg, BBC Radio, and Reuters TV.