Interior of media studio.
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Disney and YouTube TV have settled their differences, so we have peace in our time in the media business, right? Sorry, missed it by that much.
Now in a twist on the old who-pulled-what-network negotiation fight, the streamer Fubo TV, ironically owned by Disney, has pulled the NBC broadcast network – and all NBCU cable networks – from its subscribers. And don’t get us Boston natives started about the loss of NBC Sports Boston. Once again consumers have to be careful about where they are standing during the dance of the elephants.
While watching these skirmishes, there is also a fascinating intramural fight inside of the broadcast industry that these carriage battles are leaving unresolved. Do national broadcast networks get to control negotiations with streaming platforms on their own, or should the rules in cable and satellite TV that give those rights to local stations apply? The Federal Communications Commission has just jumped into this fray, with a proceeding whose outcome may help determine not only the future of these negotiations but the very future of locally based broadcast TV.
How did we get here?
You’ve got to understand the stew of 1990s Capitol Hill, the Big Bang of streaming in the mid-2000s, and years of business inertia throughout the linear TV business.
For decades, cable and satellite operators (“multichannel video providers” or “MVPDs”) didn’t need to get permission from broadcasters to carry their signals. The basis of this was that broadcasters enjoyed free spectrum and needed to serve the public interest in return and that was a sufficient trade off. But the stations affiliated with but not owned and operated by the major networks – NBC, CBS, ABC and Fox – actually used to be paid compensation (“comp”) by the networks just for affiliates clearing network programming in their local markets. It was still a wonderful life with broadcasters dividing up 95% of the TV-watching audience. But along came cable.
As late as 1992 local broadcasters were still the kings of the Hill. But feeling the heat from their growing cable competition, broadcasters descended upon DC. Congress looked to give their politically powerful local broadcasters a thumb on the TV scale, creating the right of “retransmission consent” for broadcasters. This required MVPDs to reach an agreement with local broadcasters – generally affiliates of the major networks – if they wanted to carry any broadcast programming, whether national sports, news or entertainment, or local news.
Broadcasters big and small have feasted off of this negotiation right for over 30 years. But once streaming platforms came along, the game changed. From their inception, the “virtual” MVPDs such as YouTube TV, Fubo TV and Sling TV were not legally legal obligated to negotiate with local stations to carry broadcast programming. Instead, they could and did negotiate directly and almost exclusively with the networks, effectively cutting the local broadcasters out of the room where it happens.
The dividing of the broadcasting industry
Fast forward to today and it’s not easy being a broadcaster – or a cable network owner – in the face of shifting consumer tastes and the flow of ad dollars out of traditional TV and into streaming. But rather than unite, the broadcasting industry is splintering in the face of a slew of pressures, not only between networks and affiliates but even among affiliates. The largest station groups such as Nexstar, Sinclair and Gray are only getting larger and looking for more. The smaller groups are in their view either being swallowed or ignored.
There is no more telling sign of an important, or at least a very monetarily significant, issue in DC than the presence of a “coalition.” In this case the broadcast industry has two of them pitted against each other. The Coalition for Local News is funded by broadcast affiliates. Preserve Viewer Choice is controlled by the major broadcast networks. Despite the seeming symbiosis between broadcast networks and their affiliates, they are in a dogfight over the right to negotiate with streamers.
The broadcast affiliates’ retransmission consent payments drop with every cutting of the traditional cord and the loss of that subscriber revenue. Their Coalition claims that if they should be ablet to negotiate directly with the streaming platforms and determine their own fate as in retransmission consent negotiations. In their view, if a vMVPD looks like an MVPD duck, you should legally treat it like one. These broadcast affiliates argue that without this seat at the table they will effectively lose the funding that underpins production of local news. And with the ever-increasing presence of news “deserts,” it is not a disingenuous argument.
By comparison, the networks argue that the world has changed dramatically and they are the entities making the major investments in programming to keep broadcasting afloat, especially in sports with the growing threats from Amazon and Netflix. They claim that without the ability on their own to negotiate with the streaming platforms, broadcast networks may effectively become irrelevant. Major media companies aren’t particularly attractive figures for pity, but they are themselves in an existential battle of their own with Big Tech.
Can the FCC solve this? Should it?
This FCC has a complicated relationship with the broadcast industry and the broader media business. We’ve seen fights on news programming content and threats against entertainment programming as with the suspension of Jimmy Kimmel and the cancellation of Stephen Colbert. Whose side does the FCC take in a battle involving Big Tech, major media companies, and more independent broadcasters?
The FCC launched its inquiry into the state of the local broadcast industry last week, entitled “Exploring Market Dynamics Between National Programmers and Their Affiliates.” The FCC is thus embarking on a process whose end game isn’t clear. There are a lot of issues thrown into this regulatory sink, beyond the streaming negotiation issue to the extent of individual stations ability to preempt network programming to the broad question of potential “undue influence” of networks over their agreements with their affiliates (including perhaps who gets to negotiate with streamers).
There is little question how far apart the different players in the broadcasting industry are on these issues. But maybe a good threshold question to ask is who gets what exactly out of being thrown in this – or any other – FCC briar patch? At the end of the day, with so much regulatory uncertainty, maybe there is a spur to a little internal navel gazing for the broadcasting industry at a perilous time. Their future may depend upon it.