Pay To Play
By Staff -- Broadcasting & Cable, 3/5/2006 7:00:00 PM
When Don Ohlmeyer still ran NBC's West Coast Entertainment department, the network would issue a weekly ratings report boasting it was the No. 1 cable network.
Ohlmeyer explained that, since most people get broadcast stations via cable, it was a perfectly legitimate claim. Of course, NBC's tweaking also served to point out that the Big Four broadcast networks, then as now, have far more viewers than cable nets.
It has taken broadcasters a long time to get there, but some stations now realize that they have tangible value and that cable operators will pay real money for them, just as they pay to carry ESPN or TNT.
Bigger broadcast groups, like Fox, NBC or ABC, once used retransmission negotiations as a way to get cable operators to pick up FX or MSNBC. Smaller broadcast groups accepted a cable operator's agreement to buy ads on the station in lieu of cash.
That's changing. As CBS President/CEO Leslie Moonves told analysts last week, he expects CBS and the new CW stations to get “hundreds of millions of dollars” in retransmission-consent dollars, mainly in 2008 and beyond. Stations will get a cut of that.
Moonves can go for the cash because, now that CBS has been separated from Viacom, it doesn't have to worry about helping to get Spike, CMT or MTV's new HD channel on cable systems.
Moonves may be indulging in some wishful accounting, but he is certainly not alone in eyeing multimillion-dollar paydays for his networks' valuable content.
Nexstar Broadcasting has struck some retrans deals but also fought some battles with cable operators who took them off their systems for months. Cable operators still have hefty leverage. They're the gatekeepers.
Earlier, Hearst-Argyle, which owns 28 stations, entered into retransmission-consent talks with EchoStar Communications. In the past, Hearst-Argyle's carriage deals helped Lifetime, which is half-owned by Hearst Corp. But when Hearst-Argyle dealt for itself with EchoStar, it got 50¢ per subscriber, as B&C's John Higgins reported. That was 10 times more than Lifetime essentially rebated to Hearst-Argyle for its help in the past.
Stations have obvious value because of their storehouse of hit shows. Their real value goes beyond that and is hard to replicate. Stations are local brands with a strong connection to the community. Cable operators recognize the value of that, but stations must recognize that they'd better bargain fairly.
Broadcasters complained for years about not having cable's dual revenue stream. They may have finally found it by insisting on it. Yet the burden of paying for it ultimately falls on viewers. When “free TV” begins costing cable operators money, it's likely that consumers will indirectly pay to get their local stations, too.
But let's end on an upside. With the Internet, satellite and telcos competing for multichannel subscribers, the marketplace is working to level that playing field.
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