A battle for your bucks
Let the finger pointing begin
Another television station blackout battle is happening in Iowa, and across the country, and this is a big one. It involves stations owned by Nexstar, a Texas company that owns 159 TV stations – the most of any U.S. company. It includes WHO-TV, the NBC affiliate in Des Moines; KCAU, the ABC affiliate in Sioux City; and WHBF, the CBS affiliate in the Quad Cities. The blackout is on Direct TV, which means if you get your TV signals through Direct satellite, you are not getting those stations until there’s a new agreement, and you’re not getting The Today Show, CSI or Jeopardy!, depending on where you live.
In the media business, these are called “retrans” battles, short for retransmission consent. Federal communication law requires that any business like a cable or satellite company that wants to retransmit a local station must obtain the station’s consent, and the station won’t give consent unless both sides agree on a price.
“Retrans” fees have turned into significant sources of revenue for local TV stations. They have largely replaced, if not surpassed, an important source of revenue that dried up in recent years.
At the dawn of the television era in the 1950’s, the big networks like ABC, NBC and CBS used to pay local stations to carry network shows. A station like WHO in Des Moines counted on that “network compensation” from NBC to carry Today, and The Tonight Show and Friends. That’s how networks accessed viewers across the country – by paying TV stations.
Reverse compensation
About 15 years ago, network compensation began to not only disappear, but to actually flip on its head into “reverse compensation.” The big networks figured why should they pay local stations to be a network affiliate when the stations gained a lot from the relationship? Network stations are prestigious because of their association with 60 Minutes or NFL football. Local stations get quality network programming in which to sell local advertising. Today, local stations PAY the networks for the right to carry network shows. If they don’t, the networks might take their programming to a different station in town. History shows that stations losing their network affiliation almost always suffer ratings and revenue loss.
What had been a good source of income for stations turned into a significant cost of doing business. And that’s why these retrans battles have become so important. Stations need the revenue.
A satellite company like Direct, a cable operator like Mediacom, or one of the streaming distributors like Sling TV or YouTube, must pay to carry local stations. The contract between a distributor like Direct and a local station usually runs about three years. As the contract nears its end, they try to negotiate a new deal. The stations want more money. The distributor resists. And if there’s no agreement by the time the contract ends, we get a blackout.
Viewers lose
They usually last a few days to a week at the most. But a couple of years ago, ABC affiliate WOI in Des Moines was off Mediacom cable for an entire year! That can’t be good for either company’s bottom line. It certainly wasn’t good for viewers. The standoff illustrated just how critical these battles have become.
I can see both sides’ viewpoints. From WHO-TV’s perspective, they spend a lot of money putting on newscasts, hiring staff and carrying good programming. Why should Direct TV make money by selling our product and we don’t get a cut?
From Direct TV’s perspective, cord-cutting is real. Viewers are dropping pay services like cable and satellite by the millions. Why pay more money to local stations at a time when viewers are abandoning traditional TV in favor of streaming services like Netflix and Apple TV?
Let the finger-pointing begin. Each side accuses the other of unreasonable demands. WHO’s website has a big notice blaming Direct TV. Customers who call Direct TV will get an earful about who money-hungry Nexstar is. Viewers – the ones really paying the bills - lose out. They just want to relax at the end of a long day and watch their favorite programs.
One day, Congress may step in to change current communications law. Until then, expect these ugly battles to play out in a very public way.
Four journalists fired over Gay Pride memo
A follow-up to a column I wrote a couple of weeks ago about a Michigan TV station sending a memo to its news staff to back off covering Pride Month festivities, because the stories were upsetting conservative viewers.
Following an investigation, late last week the station (also owned by Nexstar) fired the news director who authorized the memo, the assistant news director who wrote the memo, and two producers accused of leaking the memo on social media. A business journal in Grand Rapids reported the dismissals.
My question is: If the news producers had only complained internally about the memo, would Nexstar have taken the issue quite so seriously, launched an investigation and fired the managers responsible for the ill-conceived memo? Maybe so, but the public black eye certainly motivated the company to move fast and clean up the mess.
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Dave, this is fascinating. Thanks!