The Fashion Channel

Memorandum

To: The Fashion Channel

From: ID #

RE:

The Fashion Channel (TFC) was founded with the slogan “Fashion For Everyone” and currently provides viewers with dedicated fashion programming that runs 24/7. A majority of the channel’s viewers are women between the ages of 30 and 54. Despite being the only dedicated fashion channel available, TFC is looking to increase advertising spending from $45 million to $60 million in the next year to combat the growing threats of new fashion programming offered by CNN and Lifetime. These competitors are taking away from TFC’s viewership with segmented programming that has resulted in drastically improved viewer interest ratings in comparison with TFC by targeting the demographic of women between 18 and 34 as well as men of all ages.

In addition to the development of new competitive programming, the priorities of advertising and cable affiliates have shifted in favor of targeting segmented market clusters, with the most desirable clusters being those targeted by CNN and Lifetime’s competitive fashion programming. By attracting profitable clusters with relevant programming to their target demographic, these channels have achieved higher ad unit prices, cost per thousands (CPM), with advertisers. In addition to demographics, these advertising rates are determined by viewership ratings and competitive trends.

These external factors have negatively affected TFC’s future prospects. If no action is taken, TFC can expect to see a drop in CPM from $2.00 to $1.80, a 10% decrease that can be directly attributed to TFC’s unfocused programming. Additionally, TFC can expect a decline in net income from $93 million in 2006 to a projected $69 million in 2007, about a 25% decrease in overall profit. TFC can also expect a continued decline in viewer interest ratings as CNN and Lifetime continue to succeed with their segmented programming approach.

TFC’s decline in viewer interest and support from advertising affiliates is a...