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The Future of Network Distribution (The TV Show Kind)
February 10, 2010 | Neal | No commentOne of our clients here at Black Turtle Media is a group of local affiliates of one of the Big Four TV networks. Over our time working together I have gotten to know the President of those stations pretty well. What I have learned first and foremost is that the biggest issue on his mind from day-to-day is how the negotiations between affiliates and the networks whose shows they distribute will go when it is up for renewal. This issue stands head-and-shoulders above the other, perhaps better documented, issues that all media companies are facing:
- declining advertising rates;
- the search for digital revenue; and
- the convergence of local information sources – e.g., radio, newspapers, and TV
The balance of power in negotiations between networks and affiliates has fluctuated over the years with networks traditionally paying affiliates cash plus an allotment of advertising time to carry their programming. Based on perceived market power at the time of negotiations the deals have varied from networks paying affiliates to no money changing hands to affiliates paying networks. As this article shows, there is little reason to think that the affiliates hold much bargaining power. Disney CEO Robert Iger…
Will Disney (NYSE: DIS) and ABC manage the same feat during the search for retransmission fees for the network and its affiliates? “We’re pretty resolute,” CEO Bob Iger told analysts during the Disney FYQ1 call, serving notice indirectly—but firmly—to distributors.
He added: “It clearly would not be our preference to see that our signal was taken down. And we’ll do whatever we possibly can through negotiations to avoid that. But we also believe that we have an obligation to derive value from the great investment that we make in these programs, whether they’re local in nature or whether they’re national in nature. We have every intention of doing just that.”
And why not? With distribution options aplenty the networks seem to hold all the power in this negotiation. What do I mean? This article shows the power that the networks now have over multiple venues to get a particular property to the audience. Between cable-only networks, internet distribution, and On-demand services from cable and satellite providers the networks are free to by-pass affiliates until such time as the deal is right for them.
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What’s next for network affiliates? There is no guaranteed answer but my first guess is that contraction is going to become a reality and that the successful local information providers in a given market will focus heavily on their local markets with a multi-media platform of News, Sports, Politics, and Entertainment/Living over TV, radio, internet, mobile devices, and print. If they can create compelling content that can consistently deliver a significant local market then advertising dollars will follow. If the local audience continues to be fragmented between 4 network affiliates, a newspaper, and multiple newsradio stations then advertisers will continue to play those local options against each other and all of the above will struggle to make ends meet.
Tags: ABC, affiliates, cable, ESPN, newspapers, on-demand, radio, TV
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