Without at least a buck a sub, broadcasters will continue to watch the best programming drift away to cable as Oprah, a cornerstone of broadcast TV for the past two decades, may well do after the 2010-11 season. As News Corp.’s Chase Carey said last month: “It doesn’t make sense that broadcast is only ad-supported. It competes against other channels that are dual-revenue businesses that are getting $1, $2, $4, while a network like Fox sits there with truly the best programming in sports and entertainment.”
Fox is engaged in some serious retrans negotiations with Time Warner, the second largest cable operator in the land, and the word is that it is aiming for a buck a sub per month.
A buck a sub.
That should be a rallying cry for TV broadcasters in 2010.
Without at least a buck a sub, broadcasters will continue to watch the best programming drift away to cable as Oprah, a cornerstone of broadcast TV for the past two decades, may well do after the 2010-11 season.
Let’s give Fox credit for leading the charge.
“It’s not rocket science,” said News Corp. COO Chase Carey said at a B&C/Multichannel News conference in New York last month.
“It starts with making it a dual-revenue business. It doesn’t make sense that broadcast is only ad supported. It competes against other channels that are dual-revenue businesses that are getting $1, $2, $4, while a network like Fox sits there with truly the best programming in sports and entertainment.
“We need to move that business to a place where we are getting fair value.”
Retrans also came up again in News Corp.’s third-quarter conference call with securities analyst.
An analyst with Deutsche Bank began asking a question premised on Fox getting 75 cents, but was interrupted by Rupert Murdoch himself: “Don’t be so modest.” The comment provoked laughter, but I don’t think anybody thought he was kidding.
If Fox succeeds in getting a dollar, it will set a new benchmark for all broadcasters. Instead of 25-50 cents, they can demand $1 in their next retrans go-round with some expectation of getting it.
Well, no broadcaster would complain about that. They have seen a lot of ad revenue disappear over the past couple of years and they suspect that a lot of it is not coming back. They need their second revenue stream — retrans fees — to get bigger and bigger.
One reason is that they are probably going to have to share it with the networks.
The Big Four all see the retrans coffers of their affiliates swelling and they feel they deserve a share of it and are out to get it.
ABC is apparently first in line.
Colleen Brown, the CEO of Fisher Communications, which operates ABC affiliates in Portland, Ore.; and Seattle, tells me that Fisher just renewed its affiliation agreement with ABC for five years and that as of part of that deal it will be paying “programming fees” to ABC.
Brown made the point of saying the payments are not tied to the groups’ retransmission consent revenue and should not be characterized as reverse compensation.
Belo’s Dunia Shive, in her third-quarter conference call with analysts this week, acknowledged that ABC is seeking programming payments in the affiliation renewal negotiations. If she ends up paying ABC, she said, she will book the payments as a programming expense.
Neither executive was talking dollars and cents, but each indicated that whatever ABC was getting or asking, it was not substantial. Brown said the payments would be “immaterial.” Shive assured analysts the new affiliate deal would be “manageable.”
The other networks, including Fox, are right behind ABC.
CBS CEO Les Moonves laid his claim to affiliate retrans money this week in CBS’s third-quarter conference call. “As each new affiliate agreement comes up, there will be a sharing of the retransmission fees,” he told analysts.
“There’s a realization that if they’re [affiliates] getting paid retransmission fees, they’re getting it because of network providing NFL, 60 Minutes and Letterman. We are working with the affiliates right now and most understand the situation and they’re talking to us about how we do this in the best possible way together.”
If Moonves is suggesting the affiliates are ready to roll over on sharing, he’s kidding himself or the analysts. Affiliates fought hard for retrans and are not inclined to give any of it up easily.
But, as I’ve said here before, sharing is not necessarily a bad thing. If the networks don’t demand too big a cut and if they use the extra cash to improve programming and not just pump up their bottom lines, retrans sharing could give the entire industry a boost.
All agree that the loss of programming to cable and a reverse of the ratings slide must stop.
NBC has proposed that it represent the stations in retrans negotiations and use the combined leverage of all the NBC stations — O&Os and affiliates — to cut the best possible deals with cable and satellite.
There is some support for the idea. Nexstar Broadcasting CEO Perry Sook has said that if a network were willing to represent his stations in retrans negotiations, it would be willing to share a portion of whatever retrans fees the network can get above what Nexstar is now getting on its own.
In other words, if, say, NBC, were able to get $1 where Nexstar is now getting 25 cents, Nexstar would be willing the split the incremental 75 cents with Fox.
Like Sook, Sinclair COO Steve Marks said the idea of the networks representing his affiliates in retrans negotiations has “some merit,” figuring, I suppose, that broadcasters united will have more leverage.
“It is just a business issue that requires a lot of the affiliates to sit down with the networks and have a discussion about does it work and how does it work,” Marks said in Sinclair’s third-quarter conference call.
I’m not sure the network as lead retrans negotiators will work. For one thing, it would take several years to sync up all the retrans contracts so that they expire and can be renegotiated at the same time.
I also suspect that if the network and affiliates joined forces like that, cable and satellite would cry foul in Washington and cause problems. The more successful the broadcasters are, the louder the outcry would be.
In any case, the networks and affiliates need to cooperate in some fashion on retrans. Instead of squabbling about how to split the retrans pot, they should be figuring out how to make the pot grow. One encouraging note: according to Brown, after the first three years of their new five-year affiliation agreement, Fisher and ABC will work together on getting retrans fees. Perhaps the agreement is a model for others that will follow.
“Broadcast networks are still the pinnacle of the content world,” Carey said on the conference call. “They still get, by multiples, the biggest audience for the biggest events. Whether it is sports or American Idol or 24, they are great launching platforms for the best in content in television.”
A buck a sub will go a long way to keeping it that way.
Harry A. Jessell is editor of TVNewsCheck. You may contact him at 973-701-1067 or [email protected].