NEW YORK — NBC will brief its affiliate board Tuesday on plans for a massive overhaul of the traditional affiliate compensation system.
At a meeting in San Diego, NBC network prexy Neil Braun will propose offering new, longer-term affiliation agreements to stations in exchange for reduced “comp,” the fees paid to local broadcasters to carry NBC programming.
In addition, NBC will seek to recast the affil-network partnership through a new “joint venture” model that will enable both sides to more equitably share costs and revenues from forays into digital TV and potentially, big-ticket program deals, sources said.
Savings from compensation payments, said to total as much as $200 million a year, could then be plowed into investments in sports rights and big-ticket shows like “ER,” now up for renewal.
An NBC spokeswoman declined comment on the proposal, but top station groups have been briefed on its particulars. Many see long-term affiliation pacts, particularly with the currently top-rated network, as crucial to ensuring revenue and cash-flow growth, and thus preserving the value of their stations.
“We’re trying to create a new paradigm for how we do business,” said one NBC exec familiar with the plan, describing its elements as “a moving mosaic” subject to responses from the station groups.
“What they’re really trying to do is provide an enticement to affiliates, to tie it into network compensation,” said Mike Carson, gm at Sunbeam Television’s WHDH Boston. Although Carson said he was unfamiliar with details, in broad terms “it sounds like an ambitious plan to tie in all kinds of concerns on both sides.”
“It’s an attempt to be creative,” added Roger Ogden, G.M. at Gannett’s KUSA Denver, who expects “lots of different ideas and concepts to be discussed.”
Among the hot topics are how stations — and particularly those in smaller markets — will fund equipment upgrades necessary to fulfill plans to begin transmitting digital TV signals. ABC already has committed to kick in $150,000 to each station, for a total of $30 million if all convert, but even that figure represents only 10% of the upgrade cost.
“A lot of people are out there are sweating bullets about how to do it,” said one station manager of the daunting upgrade process.
NBC has made no specific promises, but now seems ready to offer both financial support and programming assistance for the transition to HDTV or “multicast” channels available through increased digital spectrum. In exchange, it will seek to share, as joint venture partners, in revenues from potential ad sales and subscription fees that could be generated by new digital channels.
The new effort at cooperation marks a change from the sometimes acrimonious dealings NBC has had with its affils. In recent months, the network has knocked heads with station owners over exclusivity of news and other programming that has been recycled on CNBC and MSNBC cable webs. And some station owners feel the network has used its ratings advantage to demand other concessions, getting local stations to turn over local ad inventory for last year’s Summer Olympics to help pay for rights fees.
Some expect a similar request if the network re-ups with the NFL or winds up paying the $10 million-an-episode figure being floated by Warner Bros. for the “ER” renewal.