Sinclair Broadcast Group has cut a new affiliation deal with ABC that reflects the changing economics of the broadcasting biz and the drive for greater retransmission consent coin.
Sinclair disclosed Friday that the new affiliation pact, which runs through August 2015, calls for the company to pay a “license fee” to ABC to carry the network’s programming. But it expects to offset that cost with high retrans revenue from local cable and satellite operators, who are under pressure to pay higher fees to carry local stations affiliated with the Big Four networks.
ABC, CBS and Fox have put affiliates on notice that they expect to share in the retrans windfall because it’s the network provided programming that make the stations must-have channels for cable/satellite distribs. NBC is in the awkward position of awaiting regulatory approval of NBC Universal’s takeover by cable giant Comcast Corp., so the Peacock is being very guarded about its discussions with affils about its retrans strategy. But undoubtedly, NBC also will seek a share of those revenues to help cover the cost of big-ticket network items like NFL and Olympic rights.
Barry Faber, exec veep and general counsel of Sinclair, addressed the retrans issue head-on in a statement about the affiliation renewal.
“Although the agreement includes a license fee, based in part on retransmission consent revenue, we believe that the pass-through to the networks of a reasonable portion of the fees that broadcasters receive is a necessary and appropriate way to make sure that the networks continue to be able to provide the most popular programming on television,” he said. “Over time, we expect that the fees paid by multichannel video-program distributors to acquire content will be reallocated so that the payments they make more closely correlate with the popularity of programming.”
The Sinclair-ABC deal may provide a framework for other network-affiliate deals that are sure to be revamped significantly at all of the major nets in the coming years. Sinclair, one the nation’s largest station groups with 58 stations in 35 markets, has been known for taking tough stands on network-affiliate contractual battles, so the fact it is amenable to retrans revenue sharing is an important signal to the larger broadcasting biz that affiliates recognize the need to help shore up network economics.
The Sinclair deal involves ABC affils covering about 5% of U.S. TV households, including the Alphabet’s outlets in St. Louis, Columbus, Ohio and Dayton, Ohio.
The potential for stations to squeeze big fees out of subscription TV providers may be tempered, however, if a push by major cablers and satcasters for the FCC to make changes in this existing retrans rule is successful. Fox and Disney made headlines in recent months with high-profile showdowns with cable operators that invoked the threat of local stations being yanked from cable systems. Those battles resulted in Fox and Disney commanding significant carriage fees for O&Os that were previously not receiving compensation.
In the case of Disney and Cablevision, the signal of WABC-TV New York was yanked for about 20 hours on the day of ABC’s live Oscarcast. That shutoff gave the cable/satellite camp the ammo it needed to press the issue at the FCC, including the call that the commission mandate broadcasters not be allowed to yank stations while negotiations are ongoing. The FCC is soliciting public comment on the retrans issue in preparation what is likely to be a formal review of the rule later this year.