SNL Kagan, Industry Leader for 25 Years, Expands Economics of Basic Cable Networks Coverage to Europe

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Initial coverage includes over 60 networks with total 2014 net revenues (advertising, affiliate and other) of $14.4 billion and cash flow of $3.7 billion.

UK programming spend

UK programming spend

With the U.S. ad market slowing and programming costs rising rapidly, the financial prospects for U.S. cable networks are no longer as bright. Those circumstances have virtually every major media conglomerate looking abroad for opportunities.

SNL Kagan, the leading expert on the Economics of Basic Cable Networks (EBCN) in the U.S., has dramatically expanded coverage to include leading markets in Europe. Here are some key findings from their research on the major markets of France, Germany and the U.K., initially covering 60 networks with total 2014 net revenues (advertising, affiliate and other) of $14.4 billion and cash flow of $3.7 billion:

In the U.K., total revenues increased at a compound annual growth rate (CAGR) of 3.1% over the past four years to $5.6 billion while programming costs fell at a CAGR of 0.8% to $3.0 billion. Cash flow increased at a CAGR of 11.4% to $1.6 billion while margins expanded from 29.4% to 30.5% during the same period.

In France, total revenues grew at a CAGR of 0.9% over the past four years to $2.9 billion while programming costs rose at a CAGR of 6.8% to $2.0 billion. Excluding the substantial startup investment by a new premium sports network, cash flow declined at a CAGR of 1.5% to $406.3 million while margins contracted from 18.7% to 15.0% during the same period.

In Germany, total revenues grew at a CAGR of 4.5% over the past four years to $5.9 billion while programming costs grew at a CAGR of 0.1% to $3.1 billion. Cash flow grew at a CAGR of 16.4% to $1.7 billion while margins expanded from 26.4% to 29.8% during the same period.

With the U.S. ad market slowing and programming costs rising rapidly, the financial prospects for U.S. cable networks are no longer as bright. Those circumstances have virtually every major media conglomerate looking abroad for opportunities. One key theme running across multiple markets which is consistent with the market in the U.S. is that the ad market is soft but sports rights and original programming costs continue to escalate rapidly, putting pressure on cash flow margins. This trend is unlikely to reverse anytime soon, which will likely cause more contentious carriage battles between multichannel operators and cable networks. This is one reason that we are seeing a lot of M&A activity in Europe. The more networks a media company has under its banner, the more leverage it gains with multichannel operators. These trends are being covered in depth on SNL Kagan's online platform via online articles, profiles of operators and cable networks, and more.

SNL Kagan currently covers over 260 U.S. TV networks as well as 60 European networks in the U.K., France, Germany, Netherlands and Italy, and will have in-depth research on over 100 European networks by year-end. This data includes key financial statistics such as ad revenue, license fee, subscribers, license fee per subscriber, programming costs, cash flow, cash flow margin (including both historical data and five-year forecasts) and more. As a part of this expansion of coverage, SNL Kagan Director of Research, Robin Flynn, will be giving a presentation today titled “The Future of Pay-TV in Europe” at an SNL Kagan and TVBEurope Breakfast Briefing. The presentation will take place at 08:30 at BAFTA, 195 Piccadilly, London. To learn more about the findings Ms. Flynn will present on, please contact Shivani Bhatt: sbhatt(at)snl(dot)com.

About SNL Kagan
SNL Kagan, a division of SNL Financial LC, is a comprehensive resource for financial intelligence in the media and communications sector, including the broadcasting, cable, entertainment, motion picture, telecom, wireless, satellite, publishing, new-media industries and media technologies. The SNL Kagan suite of products integrates breaking news, comprehensive data and expert analysis into an electronic database available online and updated around the clock. For more information, visit http://www.snlkagan.com.

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Shivani Bhatt
SNL Kagan
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