Oprah’s Move: “Show Me The Money!”
Among all the chatter about Oprah’s announcement that she’ll be ending her syndicated talk show in 2011, there have been all sorts of reasons floated in the media: declining ratings (true, but most syndicated shows have seen declining ratings recently), lack of money from local affiliates to pay the fees for another cycle of syndicated Oprah (quite possible), Oprah tiring of Chicago/the climate (couldn’t she have just moved the location of her syndicated show?), or some sort of Oprah obsession with milestones (wacky, but who knows).
Of course, it’s about the money, plus perhaps a bit of a new challenge (and a “been there, done that” attitude about the syndicated show).
I don’t know what Oprah might have made from another cycle of her syndicated show (and no one does, exactly), let’s look at a sliver of the potential economics for OWN (Oprah Winfrey Network).
OWN is scheduled to replace the Discovery Health Channel, and Discovery is planning to use the arrival of Winfrey on cable as leverage to demand higher carriage fees from cable and satellite operators.
Consulting firm SNL Kagan says Discovery currently gets about 13 cents for each subscriber for the channel. People familiar with Discovery’s strategy said it would try to hike the fee to as much as 50 cents per subscriber for OWN
Discovery Health is currently available in about 73 million homes. While it’s likely that its “Oprah-fication” would help expand that number (the most available cable networks are in 98-99 million homes), even if that didn’t happen, going from carriage fees of 13 cents/subscriber/month to 50 cents/subscriber/ month, increases the carriage fees from $113 million per year to $438 million per year. Apply a 5x multiple to that increase (would love to hear from someone in the industry what the current accepted multiple is) and the value of the cable network goes up by $1.6 billion.
Of course, increasing the household coverage would create even more value, and presumably there will be an increase in advertising revenues as well. Beating Discovery Health’s total day average viewership of 127,000 during October, 2009 doesn’t seem like much of a stretch.
Now I have no idea what portion of OWN will be Oprah’s (and what will be retained by Discovery), but any reasonable fraction of that kind of value is a lot of money. Even for someone like Oprah.
On a related note, would Chicago losing Oprah’s syndicated show/production company really be such a big blow? It certainly can’t mean that much on a relative economic basis to the 3rd biggest City in the US. It seems like that story is just part of the media herd nonsense being spun out around the Oprah announcement.