Cable: The Old New Big ThingTV is dying, right? We read about it online. Kids these days spend all their time on YouTube, and television is left to geriatrics watching Depends ads, right? But no! One word, friends: Cable. Just today, news came out that the executives at Discovery Communications, home of the Discovery Channel, are some of the highest paid in all of the media—their CEO took home $20 million, right up there with the Viacoms and Time Warners of the world. How did little old cable get so rich? Good timing, good programming, and a little bit of luck. Learn and marvel!

Look at what's working in cable's favor today:

Decline of the networks.

The networks plus cable equals the whole TV pie. And it's a huge pie. Any advertiser wanting to reach the most coveted demographic of all—relatively young men and women—has to spend big on TV. The internet hasn't destroyed television as it has print media. And the networks' roster of shows these days is weak, historically speaking—which was exacerbated by the writer's strike last year. The president of TBS says:

"There is very little consistency in what they are doing, and people don't know what to expect when they turn on the broadcast networks. They are still in the business of appointment television, but there are fewer and fewer appointments. There's a great big opportunity for cable networks."


Cable programming is getting better and better.

The days when the networks were automatically presumed to have the best shows are long gone. It's not just premium cable channels like HBO that changed the equation, either. Bravo, Nat Geo, Discovery, the Sci-Fi Channel—all are dominant players in their programming fields, in terms of quality. Cable channels have fewer content restrictions, and they've virtually eliminated the barriers to snagging good talent. Think of your favorite shows. How many of them are on cable? MOST OF THEM. Why? They're investing:

Annual spending on programming by basic networks has doubled in the last five years from $9.2 billion in 2002 to $18.8 billion in 2007, and the top 20 cable networks spent an average of $566 million per network during 2007 compared with $321 million in 2002.


Cable is confident.

The dominant theme of reporting on the television upfronts this year was the surging confidence of cable channels. They're consciously positioning themselves as direct competitors to the networks. They've grown their audiences to the point that they can't be disregarded by the same advertisers who support the networks. Money is pouring in. Discovery—that home of fine executive pay—isn't just generous with its CEO; its stock price grew more than 50% last year. The Sci-Fi Channel makes profits in the range of 40%. It's driven by good programming, which is only becoming a stronger and stronger pull for audience growth; that's one lesson of the internet, where content trumps big money. In the past decade, the overall cable audience has more than doubled.

Networks must, by design, try for mass appeal. Cable channels can target their audiences much more effectively. The scary thing for networks is that even specialized cable channels no longer represent just a niche audience any more; they are almost as plugged into the mainstream as the networks themselves. Virtually all American households at least have the option of cable, and the majority are cable subscribers. The industry is sitting in a sweet spot: it's already big enough to have reached critical mass, and it still has plenty of room to grow.

If this keeps up, I may even get cable myself.

[NYT, WSJ, NCTA]