Last March I wrote that I was watching four trends (that didn’t involve whether Chuck or Dollhouse got canceled) and one of them was reallocation of existing revenue streams, including retransmission fees for broadcast nets:
[...] especially as advertising rates between broadcast and cable begin to equalize, look for the broadcast networks to get a bigger slice of subscriber revenues.
Reallocating the subscriber dollars seems like something that has to happen, especially if the broadcast networks are the most watched networks on cable and satellite offerings. I suspect this will be a very painful process that will occur over quite a few years.
Lately, media coverage of this is heating up, largely due to Rupert Murdoch saying FOX would demand payment for carriage. In an article Titled “Networks Put The Squeeze on Cable“ Forbes’ Dorothy Pomerantz writes:
Cable stations get paid through advertising and subscriber fees. Why should broadcasters only rely on ads?
LOS ANGELES — At the News Corp. shareholder meeting last week in New York, Rupert Murdoch sent a tremor through the TV world when he announced that the Fox network will no longer be doing business as usual. From now on, Fox will demand payment from the cable, telco and satellite companies that carry the broadcast network.
[...]
Things started to change a few years ago when CBS split from Viacom. Right off the bat, Chief Executive Leslie Moonves announced that he intended to charge retransmission fees for CBS.
“We’re going to get paid for our content by cable operators,” Moonves said at a 2006 investor meeting. “Try running a cable network without the Super Bowl, the Grammys, CSI, The Final Four, Survivor and David Letterman.”
Hat tip to commenter “Mikey” for pointing out the Forbes story.
I’m really amazed that the broadcast networks aren’t getting a fee from the cable companies already. I thought retransmission fee was the norm. I can’t believe the broadcast networks have been giving the subscription TV companies this free ride. I thought Rupert Murdoch likes money. NBC and ABC could certainly use the dough.
Sure, the cable subscriber can get the broadcast channels on their own if they became unavailable on the set-top boxes, but it would drive them crazy having to flip back and forth.
Can’t see the Broadcast nets NOT pursing this more agressively. Can’t see a cable carrier NOT wanting CBS, FOX, ABC, nor NBC (if only for the football). Unfortunately the end result: more fees paid to nets and then higher subscription rates. The viewers will ultimately pay more. sigh
Kozy, my understanding is the local affiliates have negotiated fees and in some cases the affiliate is owned and operated by the network (in FOX’s case apparently 9 out of the top 10 markets). For a lot of the networks its convoluted (ABC has ESPN, Disney, etc, NBC has USA, Bravo, Syfy, Oxygen, FOX has FNC, FX..), but due to the separation of Viacom and CBS is not convoluted. It has no basic cable channels (it has Showtime and a College sports channel that for me is in an expanded sports tier).
CK, though it will cause some kicking and screaming, I think there will be redistribution of the payouts with some networks (like ABC, FOX, CBS, NBC) getting more, while some of the existing cable channels get less. But sadly, I do fear some of it will inevitably be passed through to us.
I recall that approx 15 years ago, the broadcast network affiliates were taking legal action to force the cable providers to carry the local broadcast stations. In my town, Local Government required tha the cable provider agree to cary local stations before they were awarded a franchise. Can’t have your cake and eat it, too.
“Try running a cable network without the Super Bowl, the Grammys, CSI, The Final Four, Survivor and David Letterman.”
I don’t know… I don’t watch any of those. But in the spirit of Hud’s comment, Moonves should look at the flip side of the coin… try charging advertisers money when your network’s only seen by those with broadcast tv antennas.
Robert, do not kid yourself. ALL of it will be passed on to us. Cable companies will raise rates immediately if this happens.
To Schmoker,
Heck, the cable companies will probably up the ante soon, in anticipation of having to pay retransmission fees to the nets.
Cable companies never miss a lick in upping the fees charged.