NBC plan to cut comp spurs affiliate debate

Affiliate compensation phase-out hotly discussed

NBC execs and the Peacock web’s affiliates are digging in their heels for protracted negotiations over a groundbreaking new business plan the network has put before affiliates.

The affils, gathered in L.A. this week for NBC’s spring affiliate confab, are weighing a plan that would phase out affiliate compensation at 10% per year over a 10-year period. The 25-page proposal sent to affils last month by NBC Television prexy Neil Braun calls for NBC to set up a joint venture fund with its affiliates, with NBC making quarterly payments to the fund rather than to affiliates, over the long term.

Program exclusivity is another burning issue for network-affiliated broadcasters these days. NBC and its affils are at odds over how quickly NBC News-produced programming can reappear on the Peacock’s MSNBC and CNBC cablers.

Few, if any, of the myriad issues between the web and its affils will be resolved at this week’s meeting. Rather, the meeting is seen as the “starting point” for a long and drawn-out debate over the future economic model of the network TV biz.

Many NBC affils say the joint venture plan is unacceptable in its present form. Braun will officially outline the network’s pro-posal point-by-point in his state-of-the-biz address to affils today.

Debate provoked

In an informal opening sesh Tuesday, Braun told the 200-plus confab attendees that the proposal is meant to provoke debate. Braun said he understood that affils would have criticisms of the plan, but he urged them to give serious thought to the concept of change underlying the proposal.

NBC’s goal is to move its affiliate compensation payments “out of our expenses column and into our investment column,” Braun said, according to several affils in attendance.

In exchange, the top-rated NBC would extend its affiliation deals with its current batch of stations through 2010. NBC also is offering to contribute up to a 10% stake in its all-news MSNBC cabler to the joint venture, dubbed the NBC Affiliate Growth Opportunity Venture.

$200 mil a year

NBC presently pays out about $200 million a year to its affiliates for carrying the web’s programming. Compensation is given in exchange for affiliate stations clearing blocks of the network’s programming in primetime and other dayparts.

But with the rapid-fire changes in the TV biz in recent years, NBC and the other major webs are looking to redefine the traditional network-affiliate relationship.

Web execs say the biggest profit margins in the TV biz are found in the local stations, while the network is seeing diminishing returns on its national advertising sales (the record-breaking final seg of “Seinfeld” aside) when measured against skyrocketing programming costs.

The loss of affiliate comp is a bigger issue for station owners in small and medium-sized TV markets than for those in larger markets, where the local TV ad pie is bigger.

The proposed joint venture would look to invest in all manner of media-related businesses, ranging from TV-related technology and equipment to programming, with the equity split 50-50 between the network and the affiliate body. The fund’s activities would be governed by a five-member committee, with three seats going to affils and two to the web.

In their pitch of the plan to affils, Braun and other NBC execs note that digital TV equipment is clearly a growth market, as virtually all commercial TV stations in the country will soon be shelling out millions on towers, transmitters and other digital upgrades.

NBC has set a December deadline for affils to sign on to the venture, but affils think that deadline is unrealistic and will likely be pushed back into next year.

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