Indy Affiliate Switch: New Rule Or An Exception?

Network demands for increased programming fees form the central issue in affiliate-network relations today.

And no recent story brought the situation into sharper relief than last summer’s announcement that CBS would move its long-time affiliation in Indianapolis from WISH, owned by LIN Media, to WTTV, a CW affiliate owned by Tribune Broadcasting.

The reason: money. WISH reportedly balked at agreeing to pay what the network demanded. WTTV said it would pay, and the switch was made (effective Jan. 1, 2015). CBS even put the word out: WTTV won its affiliation because it was willing to meet the network’s price.

“It came down to the value that Tribune offered in its entirety versus what LIN was offering,” Ray Hopkins, president of television networks distribution at CBS, was quoted as saying at the time. “Tribune saw an opportunity in Indianapolis to have the No. 1 network. The valuation that Tribune put forth was more in line with what we are seeking.”

The loss of the CBS affiliation came at an inopportune time for LIN, which was in the midst of being bought by Media General in a deal valued at $1.6 billion when it was announced last March. In the wake of the affiliate loss, however, the deal had to be reevaluated, and an estimated $103 million was knocked off the price – the cost to LIN of losing its CBS affiliation. The merger was approved by Media General shareholders in October.

Industry observers and local TV executives disagree about the significance of the action CBS took in Indianapolis. “I do think it had a profound effect,” says Mark Fratrik, senior vice president and chief economist for BIA/Kelsey, the media research firm. “It was a significant move because it wasn’t like [CBS was] moving [its affiliation] from a small operator to a big operator. It did affect negotiations forever after that.”

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Another observer, who requested anonymity, felt CBS’s move served a specific purpose: “To reset pricing for reverse compensation.”

“Was that achieved?” the source asked rhetorically. “Some people would probably say yes.”

“But,” the source cautioned, “the perfect storm does not exist in every market. There are a lot of things that have to come together.”

Indeed, broadcasters noted that the conditions in Indianapolis that made this affiliate switch possible rarely align elsewhere in quite the same way. “I don’t think that’s the norm,” said one long-time TV exec. “I don’t think that was the start of the ‘affiliate wars’ again. I believe it was a one-off. It was shocking, I’ll say that.”

TVNewsCheck requested an interview with a CBS affiliate relations executive, but an interview was not arranged.


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