In cable, it's survival of the fittest as channels drop from the bundle

The Weather Channel was recently dropped by Verizon Fios, which said customers now get their weather news from apps on their phones, not TV.

The Weather Channel

At the Weather Channel, the heavy snow and bitter cold that swept the Northeast this winter was cause for celebration as its wall-to-wall coverage helped lift ratings to their highest level in years.

But none of that mattered in the spring, when Verizon Fios dropped the channel from its offerings to more than 5 million subscribers. In a letter to customers, Verizon said that people want to get their reports from the Internet and apps on their phones these days, not TV.

Such is life for the small network and hundreds of other channels trying to survive as part of the much-derided cable bundle.

It has been the worst year in recent memory for cable networks, with MSNBC, the History channel, Bravo, BET, USA Network and Comedy Central all seeing double-digit declines in audience this year. In March, cable ratings were down around 10 percent from the previous year. With new streaming services stealing away viewers, cable TV has been hit with a Darwinian shake-out where only the most popular networks, such as HBO and ESPN, are able to find paying customers.

Web streaming is upending the neat arrangement long enjoyed between TV channels and cable providers such as Verizon and Comcast. Verizon pays ESPN and other channels a certain amount to carry their programming, a cost that gets factored into customers' monthly bills. But with consumers complaining about paying for too many channels and switching to online streaming alternatives such as Netflix, cable firms are feeling the pressure to cut costs - and even drop channels, especially those with plummeting ratings.

The swift decline in cable has been particularly harmful for Viacom, which typically presses cable distributors to run all of its channels - including MTV, VH1, Comedy Central and Nickelodeon - or none of them. The company announced this week it will cancel some shows and lay off staff as part of a broad restructuring plan.

The retrenchment marks a change in fortune for the cable TV business, which in the 1990s created new opportunities for minority programs, local news and niche educational networks with small but dedicated numbers of fans. The rise of cable created new genres in TV around food, health and reality shows, launching networks such as HGTV, the Weather Channel and TruTV.

But with content similar to what those channels offer now available online, cable programs that cannot draw the biggest audiences are seeing advertising fall. And some cable operators are choosing to drop some of their offerings altogether.

Suddenlink, based in St. Louis, and Cable One, based in Phoenix, have stopped airing Viacom's suite of channels, amid pricing disputes. The regional sports network for Houston went dark last year.

"For niche networks, it will be really difficult to survive with such a small audience," said Deana Myers, an analyst at SNL Kagan. "If ratings go down and there continues to be movement away from [cable TV], cable operators will have to cut back on programming costs."

Consumers may pay separately for ESPN's sports coverage or HBO's "Game of Thrones," but that prospect might prove more challenging for a channel such as USA Network, which plays mostly reruns, when Netflix and Hulu provide many of those programs for less.

Among the hardest hit are children's networks, such as Nickelodeon. Netflix and Amazon Instant Video offer vast libraries of children's series, and YouTube launched an app just for kids content. (Amazon chief executive Jeffrey P. Bezos owns The Washington Post.)

That's spelled huge problems for Viacom's Nickelodeon - ratings for its marquee show, "SpongeBob SquarePants," dropped 31 percent. And even pop star Nick Jonas and copious amounts of green slime couldn't save the Kids' Choice Awards last weekend, which saw its audience shrink by 14 percent, according to Nielsen.

In the current TV season, Disney's ratings also dropped 15 percent, ABC Family was down 7 percent, and Discovery Family was down 4 percent.

"It used to be that if you made it on TV, that meant you had great content. But that's now being tested," said Jesse Redniss, co-founder of the BraveVentures media consulting firm. "From my kids' perspective, they don't know the difference between watching cable on a 65-inch TV and an iPad, so naturally there will be things that drop from the channel package."

Viacom has responded with its own streaming service for Nickelodeon that viewers can pay for without having a cable subscription. And the company has put Nickelodeon and its other channels, including VH1, MTV and Comedy Central, on Sony's streaming PlayStation service.

Many networks, including Viacom, blame outdated measuring systems that do not track how consumers are viewing shows on demand several days later and across devices. But lower ratings have made it harder for Viacom to continue its demands that cable operators take all its channels or none. Comedy Central's audience shrank by 16 percent last year. Overall, Nickelodeon's audience was down 15 percent.

Viacom argues that cable operators hurt themselves when they drop channels.

"Distributors like Cable One and Suddenlink are rapidly losing television subscribers as a result of discontinuing popular cable programming," said Denise Denson, executive vice president for content distribution at Viacom Media Networks and BET Networks. "It's all about the consumers - the negative consequence of reducing choice for consumers will become even more evident as competition increases in these markets."

And while she agrees that enormous packages of channels won't survive, Viacom believes there will be a model for "skinny bundles."

Even with the Weather Channel's bump in viewers in February, its audience is too small for some cable operators to justify the cost of carrying the network - especially when weather apps provide the same data.

Last year, DirecTV also dropped the Weather Channel over a contract dispute but agreed to offer the channel again after scores of customer letters asking for the network to return.

The Weather Channel said it is a value compared with most channels of its size. And it is betting its future on more live coverage of big weather disasters.

"What was lost on Verizon was that people come to television for big live events such as storm coverage, and we are the only national source of storm coverage on any platform," said David Clark, president of the Weather Channel.

But he acknowledged the bigger forces that threaten channels such as his on cable. And he is working to strike up partnerships with streaming providers. And he said vocal complaints by some Verizon customers to reinstall the Weather Channel will help.

"The conversation now with distributors is all about cost reduction," Clark said. "As an independent network, we've become vulnerable to that. That is what's really happening, so we rely on our fans to help, and thankfully they do."

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