I figured that this was coming a while back. This is another side effect of deregulation. It is also the networks own fault for selling off affiliates to make quick cash way back when. Couple that with the broken business model and you can see a string of problems that were never resolved adding up to this decision. Their own greed is killing the industry.
Maybe its a good thing though. I would love to see more local programming. There's a lot of things that were good about it. The problem is that many of the stations cannot afford to do a lot of their own programming. for example, in San Francisco, the NBC station was sold by NBC to a fly by night network. When they attempted to turn around and resell the station they lost the NBC programming. When they couldn't find a buyer they threatened to shut down the station. The seller ended up keeping the station and running it on a shoestring budget. (they also tried to run it as a CW affiliate) On Wed, Dec 30, 2009 at 5:45 AM, Tracey de Morsella < tdli...@multiculturaladvantage.com> wrote: > > > Broadcasters' Woes Could Lead To The End Of Free TV - > http://www.huffingtonpost.com/2009/12/29/free-tv-in-trouble_n_405761.html > > NEW YORK — For more than 60 years, TV stations have broadcast news, sports > and entertainment for free and made their money by showing commercials. That > might not work much longer. > > The business model is unraveling at ABC, CBS, NBC and Fox and the local > stations that carry the networks' programming. Cable TV and the Web have > fractured the audience for free TV and siphoned its ad dollars. The > recession has squeezed advertising further, forcing broadcasters to > accelerate their push for new revenue to pay for programming. > > That will play out in living rooms across the country. The changes could > mean higher cable or satellite TV bills, as the networks and local stations > squeeze more fees from pay-TV providers such as Comcast and DirecTV for the > right to show broadcast TV channels in their lineups. The networks might > even ditch free broadcast signals in the next few years. Instead, they could > operate as cable channels – a move that could spell the end of free TV as > Americans have known it since the 1940s. > > "Good programing is expensive," Rupert Murdoch, whose News Corp. owns Fox, > told a shareholder meeting this fall. "It can no longer be supported solely > by advertising revenues." > > Fox is pursuing its strategy in public, warning that its broadcasts – > including college football bowl games – could go dark Friday for subscribers > of Time Warner Cable, unless the pay-TV operator gives Fox higher fees. For > its part, Time Warner Cable is asking customers whether it should "roll > over" or "get tough" in negotiations. > > The future of free TV also could be altered as the biggest pay-TV provider, > Comcast Corp., prepares to take control of NBC. Comcast has not signaled > plans to end NBC's free broadcasts. But Jeff Zucker, who runs NBC and its > sister cable channels such as CNBC and Bravo, told investors this month that > "the cable model is just superior to the broadcast model." > > The traditional broadcast model works like this: CBS, NBC, ABC and Fox > distribute shows through a network of local stations. The networks own a few > stations in big markets, but most are "affiliates," owned by separate > companies. > > Traditionally the networks paid affiliates to broadcast their shows, though > those fees have dwindled to near nothing as local stations have seen their > audience shrink. What hasn't changed is where the money mainly comes from: > advertising. > > Story continues below [image: > http://www.huffingtonpost.com/images/v/darr.gif] > > Cable channels make most of their money by charging pay-TV providers a > monthly fee per subscriber for their programing. On average, the pay-TV > providers pay about 26 cents for each channel they carry, according to > research firm SNL Kagan. A channel as highly rated as ESPN can get close to > $4, while some, such as MTV2, go for just a few pennies. > > With both advertising and fees, ESPN has seen its revenue grow to $6.3 > billion in 2009 from $1.8 billion a decade ago, according to SNL Kagan > estimates. It has been able to bid for premium events that networks had > traditionally aired, such as football games. Cable channels also have been > able to fund high-quality shows, such as AMC's "Mad Men," rather than > recycling movies and TV series. > > That, plus a growing number of channels, has given cable a bigger share of > the ad pie. In 1998, cable channels drew roughly $9.1 billion, or 24 percent > of total TV ad spending, according to the Television Bureau of Advertising. > By 2008, they were getting $21.6 billion, or 39 percent. > > Having two revenue streams – advertising and fees from pay-TV providers – > has insulated cable channels from the recession. By contrast, over-the-air > stations have been forced to cut staff, and at least two broadcast groups > sought bankruptcy protection in 2009. > > Fox illustrates the trend: Its broadcast operations reported a 54 percent > drop in operating income for the quarter that ended in September. Its cable > channels, which include Fox News and FX, grew their operating income 41 > percent. > > Analyst Tom Love of ZenithOptimedia estimates that ad revenue at the big > networks dropped 9 percent in 2009 and will be followed by an 8 percent drop > in 2010 and zero growth in 2011. > > A small chunk of the ad revenue is being recouped online, where the > networks sell episodes for a few dollars each or run ads alongside shows on > sites such as Hulu. Media economist Jack Myers projects online video > advertising will grow into a $2 billion business by 2012, from just $350 > million to $400 million in 2009. > > But that is not significant enough to make up for the lost ad revenue on > the airwaves. Advertisers spent $34 billion on broadcast commercials in > 2008, down by $2.4 billion from two years earlier, according to the > Television Bureau of Advertising. > > So rather than wait for the Internet to become a bigger source of income, > the networks and local stations are mimicking what cable channels do: > They're charging pay-TV companies a monthly fee per subscriber to carry > their programming. > > Since 1994, the Federal Communications Commission has let networks and > their affiliates seek payments for including their programming in the pay-TV > lineup. Not everyone demanded payments at first. Instead they relied on the > broader audience that cable and satellite gave them to increase what they > could charge advertisers. > > The big networks also were content to let their broadcast stations > essentially be subsidized by higher fees for the cable channels that fell > under the same corporate umbrella. A pay-TV company negotiating with the > Walt Disney Co., which owns ABC, is likely paying more for the ABC Family > channel than it otherwise would, with the extra assumed to help Disney cover > its costs for the ABC network broadcasts. > > But over time – such contracts generally run about three years – more > networks began demanding payments for the stations they own. And affiliates > already receiving the fees have bargained for more money. > > Some talks have been tense. In 2007, Sinclair Broadcast Group, which > operates 32 network-affiliated stations around the country, pulled its > signals for nearly a month from Mediacom Communications Corp., which > provides cable TV to about 1.3 million subscribers, mainly in small cities. > > Mediacom may again lose signals from Sinclair's affiliates in markets as > large as Des Moines and Cedar Rapids, Iowa, after last-ditch negotiations on > fees Monday failed to produce a replacement for an agreement expiring > Friday. Mediacom spokesman Tom Larsen said Sinclair wants a 50 percent hike > in fees, though neither company would provide specific figures. Sinclair's > general counsel, Barry Faber, said no new talks have been scheduled. > > The American Cable Association says its members – mainly small cable TV > providers – have seen their costs for carrying local TV stations more than > triple over the past three years. The group's head, Matt Polka, says those > fees have gone "straight to consumers' pocketbooks" through higher cable > bills. > > Gannett Co., for instance, which operates 23 stations, has taken in $56 > million in fees from pay-TV operators in 2009 after negotiating a new batch > of agreements, up from $18 million in 2008. Dave Lougee, president of > Gannett's broadcast arm, defends the fees, saying "broadcasters were late to > the game in really starting to go after the fair market value of their > signals." > > Analysts estimate CBS managed to get as much as 50 cents per subscriber in > its most recent talks with pay-TV providers that carry CBS-owned stations. > CBS Corp. chief Leslie Moonves said such fees should add "hundreds of > millions of dollars to revenues annually." > > That could be just the beginning. CBS and Fox are also asking for a portion > of the fees that their affiliates get, arguing that the networks' shows are > what give local stations the leverage to ask for fees. > > Over time, the networks might be able to get even more money by abandoning > the affiliate structure and undoing a key element of free TV. > > Here's why: Pay-TV providers are paying the networks only for the stations > the networks own. That amounts to a little less than a third of the TV > audience, which means local affiliates recoup two-thirds of the fees. If a > network operated purely as a cable channel and cut the affiliates out, the > network could get the fees for the entire pay-TV audience. > > If forced to go independent, affiliates would have to air their own > programming, including local news and syndicated shows. > > Fitch Ratings analyst Jamie Rizzo predicts that at least one of the four > broadcast networks "could explore" becoming a cable channel as early as > 2011. > > Any shift would take years, as the networks untangle complicated affiliate > contracts. At an analyst conference in 2008, CBS's Moonves called the idea > an "a very interesting proposition." But he added that it "would really > change the universe that we're in." > > http://www.huffingtonpost.com/2009/12/29/free-tv-in-trouble_n_405761.html > > > -- Bringing diversity to perversity for over 9 years! Mahogany at: http://groups.yahoo.com/group/mahogany_pleasures_of_darkness/
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