The average American adult spends over 4 hours a day watching TV. And that translates to an awful lot of money for the companies producing those programs: the television networks. In the US, there are two main kinds. Of the free networks, the “Big Four” are NBC (owned by Comcast), ABC (owned by Disney), CBS (owned by ViacomCBS), and Fox (owned by… Fox), with The CW (owned jointly by ViacomCBS and AT&T) in fifth place. These make money either by selling advertising or by selling their shows to “affiliates”. Affiliates comprise those TV stations – like Los Angeles’ KTLA – which pay “reverse retransmission fees” to networks in exchange for carrying their content.

These affiliate stations join the second type of TV network – featuring premium channels like Showtime and Starz – in making their money from both advertising and subscriptions which are often bundled together into cable packages. The ultimate value chain is therefore pretty complicated. The viewer pays their cable provider – the cable provider pays the TV stations – and some of those stations then pay the parent network whose content they use.

The big challenge facing all parties is “cord-cutting”: people are increasingly canceling their cable subscriptions and instead choosing to cherry-pick the content they actually want. This trend is affecting different players in different ways – but many networks are now looking to go direct-to-consumer, launching streaming platforms that a user can sign up for with no need for cable (like HBO Now, CBS All Access, and NBC’s Peacock).

That trend could eventually lead to these being the only places you can watch the networks’ content. That’ll lead to lower advertising and affiliate revenue for the producers – but also more subscription revenue. The affiliate owners, meanwhile – companies like KTLA parent Nexstar – may find themselves without a product to sell. And other potential losers include the likes of Disney-owned ESPN: a default network in cable bundles now, but unlikely to get the same number of viewers paying for it as a standalone.

83 million people currently pay $9 a month for ESPN – but 56% of them would cancel if they could. ESPN would need to convince all the remaining 44% to pay $20 a month to maintain revenue post-unbundling: yet only 6% of people said they would pay that much. So ESPN’s subscriber cash is likely to fall, while the fees for sports broadcasting rights will stay the same or climb, thanks to increased competition from streaming giants – more on which later.

Investors, then, aren’t too keen on ESPN. But that’s not true of all TV networks – so press on to see how they value them.

The takeaway: TV networks make money from advertising, subscriptions, and affiliate retransmission fees. Cord-cutting could hurt all of them, particularly affiliates and underwatched channels.