This last decade the relationship between the major television networks and their affiliated stations has gone through a metamorphosis. The networks might call it a weaning away from the network compensation tit. After decades of networks paying affiliates to carry their programs, that part of the gravy train of revenue is coming or has come to an end.
The loss of network viewers and the increased cost of production has made the typical affiliate meetings more of a gripe session than a “Look there’s Paris Hilton” star gazing and toasting the new season scenario.
The networks have taken a new attitude as evidenced by the recent comments of the new king of television Les Moonves, CBS CEO. On September 15th, Moonves did a one hour interview with Charlie Rose. In the interview, Moonves really capsulated all four major networks' feelings about compensating affiliates. He said that they (CBS) supply the affiliates with quality programming that has proven to get a substantial audience. He insinuated that it was up to the local stations to translate that into cash at the pump.
Mooves said that in 2006 that CBS will pay out the last of about 250 million to affiliates in traditional compensation. “Starting next year,” said Moonves, “that will be…”0.”
It is no secret that Mooves keeps one eye on his program ratings and the other eye on the CBS Corp. stock ticker. He knows that Sumner Redstone, Viacom and CBS chairman, doesn’t like losing money. So far this year, CBS stock is up 12%. (Yes, I bought a few shares.) Redstone last month, ousted the CEO of the Viacom division because Viacom stock went down about 11%.
The other networks have done similar negotiations with their affiliates. A few years back, FOX had a verbal tug of war with its affiliate group and there are many reports that General Electric is not happy with the profit and performance of NBC/Universal.
The result is that the network affiliates will have to fend more for themselves in this new world of “Old” and “New” media. The days of 20, 30, or 40 percent returns are really gone. Affiliates have to get real. They will have to invest to keep up to date and find creative ways to sell the product the network gives them.
Affiliates have to realize that they are now competing with Xbox, Google, Yahoo and the rest for viewer time, entertainment and advertising dollars. The affiliate bean counters will have even less to count if they don’t. The two best returns for local stations right now are HD (to keep competitive with the other new media) and local news. Investing in both, technology that the viewer can see and local news will keep the end product still desirable. Advertisers like local news. Local stations have nothing to offer but content so it better be the best in quality, substance and availability.
17 million Americans have already made the HD investment and demand is growing faster than A.C. Nielson can count. (But they are counting) Will Erie television meet the challenge? I really hope they do.
The loss of network viewers and the increased cost of production has made the typical affiliate meetings more of a gripe session than a “Look there’s Paris Hilton” star gazing and toasting the new season scenario.
The networks have taken a new attitude as evidenced by the recent comments of the new king of television Les Moonves, CBS CEO. On September 15th, Moonves did a one hour interview with Charlie Rose. In the interview, Moonves really capsulated all four major networks' feelings about compensating affiliates. He said that they (CBS) supply the affiliates with quality programming that has proven to get a substantial audience. He insinuated that it was up to the local stations to translate that into cash at the pump.
Mooves said that in 2006 that CBS will pay out the last of about 250 million to affiliates in traditional compensation. “Starting next year,” said Moonves, “that will be…”0.”
It is no secret that Mooves keeps one eye on his program ratings and the other eye on the CBS Corp. stock ticker. He knows that Sumner Redstone, Viacom and CBS chairman, doesn’t like losing money. So far this year, CBS stock is up 12%. (Yes, I bought a few shares.) Redstone last month, ousted the CEO of the Viacom division because Viacom stock went down about 11%.
The other networks have done similar negotiations with their affiliates. A few years back, FOX had a verbal tug of war with its affiliate group and there are many reports that General Electric is not happy with the profit and performance of NBC/Universal.
The result is that the network affiliates will have to fend more for themselves in this new world of “Old” and “New” media. The days of 20, 30, or 40 percent returns are really gone. Affiliates have to get real. They will have to invest to keep up to date and find creative ways to sell the product the network gives them.
Affiliates have to realize that they are now competing with Xbox, Google, Yahoo and the rest for viewer time, entertainment and advertising dollars. The affiliate bean counters will have even less to count if they don’t. The two best returns for local stations right now are HD (to keep competitive with the other new media) and local news. Investing in both, technology that the viewer can see and local news will keep the end product still desirable. Advertisers like local news. Local stations have nothing to offer but content so it better be the best in quality, substance and availability.
17 million Americans have already made the HD investment and demand is growing faster than A.C. Nielson can count. (But they are counting) Will Erie television meet the challenge? I really hope they do.
Like it or not. You've got to keep up or your going to wind up kissing somebody else’s backside.
"Congress passed a law on February 1, 2006, setting a final deadline for the DTV transition of February 17, 2009. Most television stations will continue broadcasting both analog and digital programming until February 17, 2009, when all analog broadcasting will stop.." FCC http://www.dtv.gov/
If You Build It....They Will View.
6 comments:
Jack,
I've always wondered what percentage of the station's revenue is from the affiliate payments. In other words, how bad is this going to hurt the local affiliates bottom line? What kind of dollars would the local stations be seeing from the networks?
That is a very good question. Traditionally it has been a percentage of the stations rate for the time period. Usually the nework kept 80% and paid the station about 20%. But that figure really varies based on each market condition. As an example, NBC used to pay WICU a much higher amount because of its dominence in the area and that is was a VHF station.
Each contract is negociated over again as the affilate contact comes due. I was recently talking to a former WICU Exec who told me that NBC was always threatening to cut compensation and its affiliation for one reason or another. Networks do like to push their weight around. How much the network compensation was in total for each station annually compared to their other revenue would take some more digging. I'll see what is available.
Jack,
Any comment about what "Roger" wrote in the comments section of Scott's blog???
MMM. Roger..and all the other names he goes by has not read this blog or the suggestions I have made. It seems if it is not something he agrees with...than it is not positive. Strange reasoning. I think Scott answered him well and I think Scott backed up most of what I have said all along. Erie TV news is held hostage to corp mandates. Even saying that, there are still some bright spots and I hope to point those out as well as the mistakes. Scott carefully pointed out the problem of "young inexperienced reporters." Take a look at what I wrote above.
Saw Sumner Redstone (Chairman/Owner of Viacom and CBS) last night on Charlie Rose (PBS). Sumner is quite a character! While Les may run CBS Mr. Redstone made it quite clear he owns CBS. Les better keep the profits comin' or Sumner could get pissed!
I like the new news opens on WSEE. Very nicely done. Excellent photography and color composition. Nice to see that WSEE still does quality production work.
Post a Comment