Tribune Impasse Is Behind CW OTT Option

CBS’s and Warner Bros.’ interest in streaming the CW as a pay OTT service is being spurred by their inability to renew an affiliation agreement with Tribune Broadcasting, according to sources familiar with the negotiations.

Tribune is the network’s key affiliate. It airs the network in 13 markets, including six of the top 10 — New York, Los Angeles, Chicago, Dallas, Washington and Houston.

Tribune is also a charter affiliate of the CW, having struck a 10-year affiliation agreement when UPN and the WB merged to form the CW in 2006. That deal expires in August.

The primary sticking point is money, the sources say. Tribune has always paid reverse comp, but is balking at the network’s demands for more.

In recent years, Tribune’s CW stations have begun receiving retransmission consent payments from MVPDs, but the revenue is said to be a fraction of what Big 4 affiliates receive.

Money is not the only problem, the sources add. Tribune is insisting on digital rights to the CW programming within its market, the sources say. To do what is not clear. And it is demanding another long-term deal.

Both are non-starters for CBS and Warner Bros., the sources say.

That the relationship between CW and its principal affiliate is strained does not come as a complete surprise.

In March 2014, at an investors’ conference, Tribune CEO Peter Liguori complained about the CW programming, saying it should stop targeting young people who don’t watch television, according to an account in Deadline Hollywood. The network, he said, “can’t move forward without us.”

Frustrating the CW partners is that other major groups with affiliates, including Sinclair, have reupped with little trouble, the sources say.

Bloomberg reported yesterday that CBS and Warner Bros. are mulling the OTT idea as a way to generate more revenue from the network programming.

The CW would offer its programs as part of a linear channel as well as individually on demand for a modest monthly fee — perhaps $2 or $4. CBS All Access, an OTT service comprising the local CBS O&O or affiliate as well as on-demand CBS shows, goes for $5.99 a month.

If CBS and Warner Bros. go the OTT route, they would not pull the plug on the broadcast network, the Bloomberg story says. Rather, it would be simulcast on the OTT platform, somehow compensating broadcast affiliates for the loss of the linear exclusivity.

The sources say the CW has other options for moving forward without Tribune. Among other things, it could seek out other broadcast affiliates in the 13 Tribune markets. Or, in the half dozen Tribune markets where CBS has an O&O, including the top three markets, it could put the network on a subchannel of the O&O.

Finding other major-market affiliates could get tougher. The FCC incentive auction this spring, in which it will buy TV spectrum to sell to wireless carriers, is expected to winnow the ranks of stations, particularly in the major markets.

Tribune itself indicated that it is interested in selling at least some of its stations. It argued for auction rules that would maximize the value of stations in the auction.

Tribune has options, too. If it doesn’t sell its CW affiliates in the auction, it could produce or acquire other programming to replace CW.

A spokesperson for CBS declined comment on the Tribune situation. A spokesperson for Tribune has yet to respond to a request for comment.

In a related development, CW President Mark Pedowitz, speaking at the TCA press tour this week, said that the CW is reconsidering how it licenses its programs to OTT services like Netflix and Hulu over the next six to nine months, according to Adweek.

“We’re now at this great place, thanks to the strength of the schedule and the strength of the shows, that we’re now exploring many … of our options, and there are many entities that are quite interested in the CW product,” he said.

“So we’re going to continue to explore where that plays out, and it could play out in many different forms.”