Cable television is a changing and very complex business, but Paisner says it’s fairly easy to sum up the future for Hearst’s networks.

“Even in the middle of a media revolution where all assumptions are suspect and everything is on the table, it’s a very promising outlook,” he said. “But as with every other medium, the opportunity isn’t going to be handed to us.

“Our strength comes from our size and our popularity with audiences, earned over many years,” Paisner continued. “It is increasingly going to be hard to build big networks that attract big advertising. There are just over 30 networks that reach more than 85 million households. We may see a few more, but it’s going to be challenging to get that many consumers to tune in to something new. They don’t have the time or the attention span. So you really want to be there right now. And we are. We’re invested in five of the biggest and most valuable names in cable—ESPN, ESPN2, Lifetime, A&E and The History Channel. Each of them reaches more than 90 million Nielsen households. And all have created or strengthened interactive media units and are expanding the menu of broadband services.

“There were a lot of successes in 2006,” he added, “and there were a few setbacks. But all our businesses are in a very good place to take advantage of the opportunities in a changing business.”

Lifetime began 2006 with a public dispute with the EchoStar DISH Network and was off the network through January. With that dispute resolved, the channel returned its attention to programming.

Deals were concluded for off-network rights to three popular series: “Medium,” “Desperate Housewives” and “Grey’s Anatomy.” Both “Medium” and “Desperate Housewives” began playing on Lifetime once a week during the year. “Desperate Housewives” will be available for Monday-through-Friday viewing in 2008, “Medium” in 2009. “Grey’s Anatomy” began a once-a-week run on the network early in 2007 and will start its Monday-through-Friday plays in 2009.

Lifetime original movies continued to win with both audiences and critics. “The Fantasia Barrino Story: Life Is Not a Fairy Tale” debuted in prime time in August and was one of the highest-rated TV movies of the year. Other original movies included “A Girl Like Me: The Gwen Araujo Story” and “For One Night.”

In 2006, Lifetime created a new digital and broadband unit to ensure that the network’s brand, programming and specially created new content reach as many women on as many distribution platforms as possible.

The Lifetime Movie Network continued to grow and is now available in more than 50 million homes.

The A&E Network had one of the best years in its history, mainly due to its focus on personality-driven reality shows. A strong lineup was led by a new season of “Dog the Bounty Hunter,” and continued to attract larger and younger audiences. “The average age of the A&E prime-time viewer has dropped from the high 50s to the low 40s in the last few years,” said Paisner. “That’s a very important demographic for advertising sales.”

Other successful returning A&E reality shows include “Criss Angel Mindfreak,” “Intervention” and “Inked.” Among the additions to the reality lineup were “Driving Force,” about drag-racing legend John Force, his wife and their three daughters who followed in the family business; and “Gene Simmons Family Jewels,” which chronicles the life of the former KISS frontman and his family.

A&E complemented its original reality shows with strong off-network programming. In September, the network began showing “CSI: Miami” nightly during the week, and in January 2007 it launched the much-awaited off-HBO debut of “The Sopranos.”

The network presented several showcase movies during the year, including “Flight 93,” a dramatization of the heroism of the passengers aboard the United flight that crashed in Pennsylvania on 9/11, and “Touch the Top of the World,” about the first blind person to reach the summit of Mount Everest.

The History Channel, A&E’s sister network, continued to expand its core following with greater appeal to the prized, but elusive, male audience with such series as “Modern Marvels” and “Lost Worlds.” The channel now has some of the best male demographics in the industry.

Among audience and critical hit specials in 2006 were “Washington the Warrior,” “Lincoln” and “Titanic: Final Moments.” The History Channel also won three Primetime Emmy Awards—two for “Rome: Engineering an Empire,” and one for “10 Days That Unexpectedly Changed America.”

Continuing to expand internationally, The History Channel completed a long- term extension of its partnership with the Sky satellite service in the U.K. and will now bring the channel to parts of central and northern Europe. Locally tailored versions are currently available in 75 countries.

For both A&E and The History Channel, the broadband strategy centers on using their digital networks—Biography, International History, and Crime & Investigation—in both broadband and standard television applications. Said Paisner: “It gives them a base for experimenting beyond the main networks and creates new markets for the digital channels. You’ll see A&E- and History-branded productions appearing in greater numbers in the digital markets, including on iPods and cell phones.”

The big news at ESPN—aside from having another record year in revenues and earnings, and bringing sports television to more than 90 million households —was its snagging of “Monday Night Football.” After years as an icon for ABC, it immediately started to deliver the highest ratings in ESPN’s history.

During the last two years, ESPN has announced two major new-media initiatives. It licensed a wide range of its content to Electronic Arts for video games in 2005, and it launched its own cell-phone business in early 2006. While the licensing deal has worked out well, the cell phone business did not and was shut down toward the end of the year. ESPN is now shifting its strategy and licensing its valuable content to other cell-phone providers.

On the syndication side of the business, King Features had a strong year, with the introduction of several new comic strips, including “The Brilliant Mind of Edison Lee,” and a number of columns. In a tough newspaper syndication marketplace, the company held its own and continued to be an important source of supply for comics and features for newspapers around the world. Betty Boop and Popeye continued to lead King Features’ merchandise licensing business, and a new program built around Patrick McDonnell’s “Mutts” comic strip began to get traction.

Hearst Entertainment, with its hit “Modern Marvels” series, is a major supplier to cable television, and in 2006 received a pilot order from Paramount Pictures for a new first-run station syndication series. The business also manages a library of over 250 theatrical and television movies distributed in the U.S. by Tribune Entertainment and outside the U.S. by Lakeshore Entertainment. Sales in 2006 were strong around the world.