Family Feuds: the Bloodier, the Better for Disney and Comcast
Never mind the 1950s; these days, we live in the Golden Age of Television. And TV is the gold that's starting to pile up for broadcasters with offbeat programming. Case in point: the recently aired Hatfields & McCoys miniseries from cable's History channel, a unit of A&E Networks owned by Disney (NYS: DIS) , Hearst Corporation, and Comcast's (NAS: CMCSA) NBCUniversal. The series smashed the record for viewership of non-sports cable TV fare, portending good times ahead for cable channel operators.
Blasting their way to high ratings
Hatfields & McCoys boasted numbers that would be the envy of even the traditional "big four" broadcast networks. The first two parts of the series drew 13.9 million and 13.1 million viewers, respectively, while the part-three conclusion roped in 14.3 million.
By contrast, American Idol, the longtime top-rated show from News Corp's (NAS: NWSA) Fox, had a viewership of 20.7 million for its winner-take-all finale (although that result was weak, considering the high numbers of previous season finales). Even an old war horse like the seemingly eternal sitcom Two and a Half Men on Disney's ABC only captures about 11 million sets of eyeballs these days.
Cable shows have been on a tear lately. Earlier this year, The Walking Dead, a popular zombies-among-us drama on AMC Networks' (NAS: AMCX) flagship channel, set a new high for viewership of a dramatic cable series. Its blood-drenched season-two finale attracted 9 million watchers, a more than 50% improvement over the viewership of season one's last episode.
A break from the past
History (formerly The History Channel) is one of several cable channels retuned and reprogrammed to appeal to a wider audience. Once upon a time it broadcast shows truer to its name, i.e., documentaries about the past. Before long it narrowed its focus even further, to the point where all it ever aired, it seemed, was programs about various facets of World War II.
To say such programming has limited potential viewership is an understatement -- which is probably why the clever execs at Disney, Hearst, and Comcast brought in management that spiced up and broadened the channel's schedule. Out went the seemingly endless march of war documentaries, and in came docu-reality series such as Pawn Stars and Ice Road Truckers.
These shows have about as much to do with history as the average Batman comic, but no matter; over the course of several years, research indicated that the channel's ratings improved over those of any other single cable outlet. It wasn't necessary to show history on History, after all.
That same formula found success on another channel on the cable box: Bravo TV. Once upon a time, Bravo was the home of such high-culture, low-viewership fare as ballet and dense foreign art films. But Bravo gutted its identity and schedule even more radically than did History. Goodbye, opera; hello, real-life soap opera. Now almost purely an outlet for reality programming, the channel is one of the top cable destinations, thanks to its raft of catty middlebrow shows like the Real Housewives series.
Profiting from tragedy
In contrast to the unfortunate title families portrayed in Hatfields & McCoys, the entities behind the show should benefit handsomely from the drama. You can bet that they've got more homespun series and/or movies in the works, which, if done right -- and History seems to be doing things right these days -- will attract numbers comparable to H&M.
On top of that, the channel has likely roped in new viewers who will also take a look at (and, hopefully, regularly tune into) its regular shows. The subsequent lift in viewership of such offerings should create higher demand from advertisers and hence a boost in ad rates. On top of that, at the end of July, History will release the Hatfields & McCoys on DVD and Blu-ray, bringing in ancillary revenue that should be robust, given the good word of mouth on the series.
So who will gain the most from the ratings win and new eyeballs? Almost certainly the two main shareholders in the channel, Disney and Hearst. Both currently own around 42% of A&E Networks and look set to increase those numbers, in some configuration, before too long. This is because Comcast/NBCUniversal has exercised a right to have the venture buy out its minority stake, leaving the remaining partners with 50% each.
Regardless, in the short term, that's a boon for Comcast, as it will be selling on a high. But investors wanting to parlay the Hatfields & McCoys success into longer-term gains will probably be better off grabbing some Disney stock (Hearst isn't publicly traded). The Mouse is rapidly getting over missteps from earlier this year (remember John Carter?) and doing very well of late. Investors have already taken notice, pushing the stock up over 20% year to date.
No matter what, expect more high-quality cable fare from operators like History and its ilk. Unlike the real-life Hatfields and McCoys, this story doesn't look like it will end tragically.
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