The Network-Affiliate Conundrum
With the recent speculation regarding NBC’s interest in cutting back to two hours in primetime, another long-simmering issue is coming to a boil: Why are the traditional television networks (CBS, NBC, ABC and Fox) still in complete control of the financial and legal relationships between the affiliates and the virtual MVPDs otherwise known as YouTube TV, Hulu, DirectTV Now, Sling and the rest of the gang?
Way back in time, maybe 10 years ago or so, the network affiliates, through their affiliate associations, resolved to negotiate directly with the nascent virtual players in the same manner they had already been doing with the traditional cable and satellite players. To their chagrin and complete frustration, the affiliate associations were rebuffed by both the vMVPDs and the television networks, who had joined forces in order to control the revenue and determine the value they believed the affiliates were worth, using their affiliates as leverage to help clear their slate of programming channels.
Never mind that many of the early subscribers were using these new platforms as a combination antenna service and virtual DVR. Never mind that much of the most-watched programming remained the local news. Never mind that the networks, who were now charging ever-increasing rates for their own “programming deals” with the affiliates, were now dictating to the affiliates exactly how little they would be allowed to “earn” if their signals were carried on these streaming platforms. But much like the early days of social media, the affiliates had little choice but to take the deal lest they risk not being seen at all. And never mind that unaffiliated stations were completely ignored by the vMVPDs simply because they did not have a network representing them.
Having been snubbed by both parties, the affiliate boards set about negotiating as best they could, looking for opportunities and exclusivity only to later discover that the networks were hard at work using the affiliates’ own signals to drive viewers to their newly hatched streaming platforms with little regard for the damage they were inflicting on the local stations.
Exclusivity went out the window with the incessant promotion of Peacock, Hulu, Disney+, Paramount and Tubi, but small promises were made to share some of the expected revenue in a kind of reverse payment for all that promotion. As Wimpy would say: “I will gladly pay you Tuesday for a hamburger today.” To make up for these payments, the networks continued to demand and generally received more money from local broadcasters in programming fees.
The networks are desperate to keep up with Netflix, Amazon Prime and others, but they are hastening their own demise in the process. At some point soon, affiliate owners are going to have to demand and receive a reduction in network fees, especially if and when primetime drops to two hours. If the affiliates are able to wrangle a significant decrease in fees, this will leave the networks with far less cash which could, in turn, damage these fledgling network streamers and the content they need to keep generating an audience.
Perhaps a potential solution lies in a more cooperative relationship between the networks and their affiliates. Let the affiliates have a meaningful financial stake in the streaming platforms. Stop playing the middleman and let the affiliates negotiate directly with the vMVPDs, which they have proven adept at doing with cable and satellite providers. Consider running original affiliate content on network streaming platforms, which will bolster both sides of the relationship and add much-needed original content to platforms heavily laden with reruns.
And here’s a novel idea: Create network content that can be seen only on network affiliates — if not forever than for a reasonable length of time before it hits the streaming platforms. At the end of the day, none of these traditional television networks will survive if they choke off the local affiliates and the network programming they promote and carry.
Have some respect for the 70-plus year relationship with your affiliates and find a way to work together and thrive. Our respective futures depend on it.
Emily Barr is the former president and CEO of Graham Media Group.