SNL Kagan predicts massive first-quarter writedown — Discovery said the Oprah Winfrey Network has more momentum than ever
The Oprah Winfrey Network could lose an estimated $142.9 million this year, research and investment firm SNL Kagan said Wednesday, suggesting this might "tempt" co-owner Discovery to pull the plug on the venture.
SNL Kagan noted that the cancellation of Rosie O'Donnell's show last week ended hopes that it could boost the network's low ratings. OWN laid off 30 employees on Monday in another sign of problems for the network.
Also read: OWN Laying Off 30 in Restructuring
The firm said there could be a "significant write-down" at OWN for the first quarter of this year for programming costs for failed shows and severence costs.
Discovery spokesman David Leavy told TheWrap that SNL Kagan's report was "riddled with inaccuracies and bad information."
"The venture is on more solid ground with more business momentum than ever before," Leavy said. "Last Sunday, OWN was the number network on cable for women and people at 10 p.m. We remain confident in the future of OWN, and the long-term value we are building."
SNL Kagan focused on less hopeful numbers, saying the network was forced to pay out $15 million of what was to be a $40 million, two-year contract for O'Donnell.
"The problems the network faces are many," the firm said, including bad press that may discourage advertisers and carriage agreements that will expire in late 2012 and 2013.
"That means Discovery could end up negotiating carriage agreements for OWN again starting at the end of this year. Its hope for license fees of 20 cents to 25 cents per sub may now be unrealistic," the firm added.
A person close to OWN told TheWrap those numbers were inaccurate.
SNL Kagan also noted — as TheWrap reported earlier this week — that Discovery is taking on a greater role in the management of OWN, including installing Discovery chief financial officer Neal Kirsch as the chief operating officer position at OWN.
SNL Kagan also said it would "not be surprised to see Discovery ask Oprah Winfrey's Harpo Productions to finance some of the network's losses going forward." Discovery has already invested heavily in OWN, agreeing in August 2010 to boost its initial $100 million commitment by $89 million. In February 2011, it committed another $50 million, mostly toward programming.
The firm said OWN could still bounce back, noting recent ratings improvements. But if it doesn't, it could be doomed.
"Stay tuned, the story at OWN is far from over. Ratings for OWN in January were up 10% to a 0.13, after Oprah's new show, "Oprah's Next Chapter," aired, but it's still a miniscule rating compared to the programming investment," the firm said. "Without a significant ratings boost by year-end, this could be Oprah Winfrey's last chapter in the cable network industry."