Peter Kafka

Recent Posts by Peter Kafka

Why Al Jazeera’s Cable Move Could Cost Much More Than $500 Million

al jazeera logoAl Jazeera could have been the first really serious player to make a big bet on Web video news. Instead, it’s placing a giant bet on cable TV.

Why? I asked yesterday, and many of you replied. Thanks!

Your answers break down into two basic schools of thought:*

Al Jazeera wants to be on American cable TV because of optics. That is: Its Qatari owners think being on American cable TV will validate it as a Very Serious News Operation, like CNN — just being on YouTube won’t cut it. So according to this line of thought, Al Jazeera will spend anything to make that happen — even $500 million for a cable network many thought was worth far less. (Note to Al Jazeera/Current completists: I’m told that the deal was $450 million plus debt, which means the $100 million figure we’ve been batting around for Current TV founder Al Gore’s take from this may be a touch high.)

Al Jazeera wants to be on American cable TV because it thinks being on American cable TV is a great business. This is the argument people on Al Jazeera’s team have been making publicly and privately. The nice thing about the argument is that we won’t know for several years how it plays out. The tough thing about this argument is that the odds are against it.

Why? Because while Gore was able to convince most of Current TV’s pay TV partners to keep carrying the network once Al Jazeera bought it, those pay TV deals will expire over the next few years. And as they do, players like Dish Network, Direct TV and Comcast will try to drop the network, or at least push the per-subscriber fees they pay for the network way, way down, as Reuters notes.

SNL Kagan analyst Derek Baine predicts that Al Jazeera may end up having to give up on its subscriber fees altogether to convince pay TV operators to keep the channel on. And if that happens, a profitable operation ends up becoming a money loser quite quickly.

al jazeera america projections via SNL Kagan

The optimistic version of this argument holds that Al Jazeera America will be able to keep its subscriber fees intact, or even raise them, because pay TV customers value news.

After all, they say, look at what Fox News gets (82 cents per subscriber, per month). Or CNN (57 cents). Or CNBC (32 cents). Compared to them, the 12 cents per sub that Al Jazeera is getting right now under Current TV’s old deal is a bargain.

I have a rooting interest in that view being correct, because a big and previously untapped market for serious news and international news is good for the journalism job market. But there’s a reason American TV news avoids serious news and international news.

Meanwhile, as I noted yesterday, Al Jazeera’s embrace of cable means it will have to move away from the Web. As my corporate colleagues at The Wall Street Journal report, Al Jazeera is going to stop streaming its Al Jazeera English broadcast on the Web to placate pay TV owners. The new channel won’t go on the Web, either.

That leaves open the possibility that Al Jazeera’s American audience could actually shrink once it goes to cable, instead of expanding. And that would be a bummer.

*Though we should note that “Peter Kafka is an idiot” was a popular third option.


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