OWN's Lesson For Yahoo: Big Names Don't Necessarily Equal Hit Channels

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As companies like Yahoo (NSDQ: YHOO) make big investments into video content channels with name-brand film and television talent, they might want to consider the plight of basic cable’s Oprah Winfrey Network. According to a rather damning report from research company SNL Kagan, Winfrey’s branded network could end up losing as much as $143 million this year.

Ratings for the channel have been so anemic that even when Winfrey finally put her very bankable face on the network’s schedule in January with new series Oprah’s Next Chapter, the resulting 10 percent ratings uptick didn’t even come close to bringing OWN’s viewership numbers up to the level of respectable.

Then this week, the channel, which launched about a year ago, announced that it was canceling a high-profile talk show built around Rosie O’Donnell, paying $15 million to buy her out of what was a two-year $40 million contract and laying off 30 staffers in the process.

Now, Kagan reports, Discovery Communications (NSDQ: DISCA) — which jointly launched OWN with Winfrey’s Harpo Productions and has bankrolled most of the cost so far — is about to take a big first-quarter write-down and is getting restless. Discovery executives haven’t publicly given any indication that they’re about to abandon their investment in OWN, but SNL Kagan predicts the cable media giant will soon approach Harpo about shouldering more of the channel’s cost going forward. The research company estimates that OWN lost about $107 million on a cash flow basis in 2011.

Meanwhile, more trouble is ahead, with the channel facing the expiration of a number of carriage agreements on major cable, satellite and telco TV services. Discover had hoped to secure per-subscriber rates of 20-25 cents from these carriers — rates that are hardly high among ad-supported cable networks. But given OWN’s current inability to find traction with viewers, SNL Kagan believes that even bar may be too high.

So why can’t Winfrey translate her huge success in daytime syndication over two decades into basic cable hits? The consensus among TV program analysts we’ve spoken to is that Harpo, while adept at daytime talk shows, may not be as well equipped to program an entire 24 hour network aspirationally themed shows.

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