Local Broadcasters Shouldn’t Stand in the Way of Online VideoSeptember 4, 2015
The role of network affiliates in the media industry is a strange one. It would be unfortunate if they stood in the way of the evolving online video marketplace. A Wall Street Journal article from today suggests they are.
The major broadcast networks still create some of the most popular programming. But people don't really watch “NBC” or “Fox.” They watch a local broadcaster, who might actually be owned by the network itself (like KNBC in Los Angeles) or which might be a separately-owned affiliate (like KING in Seattle). The actual content that is carried by each broadcaster might be different–most of the top programs will be the same, but there will be local programs, different syndicated programs, and so on. This system has been around for a very long time, and it's obviously more complicated than the way cable channels like ESPN or SyFy are distributed.
The process by which cable or satellite providers carry local broadcasters is equally complex. They negotiate with the local broadcaster for “retransmission consent,” which allows them to carry the local broadcast signal. But this doesn't give the cable system a copyright license to carry actual programming–the local broadcaster often won't even have rights in the programming to give. Rather, copyrights are taken care of by a separate fee that cable and satellite systems pay for a compulsory license.
A lot of online services are interested in carrying network programming–in fact, some of them want to carry the traditional linear programming stream, and not just provide on-demand access to shows (the way, for instance, Hulu does). DISH's Sling TV already provides such a service, though not with the broadcast networks, and Apple is rumored to want to launch a similar service, as well. The way this would work is simple: when you go to watch “CBS” on such a service, you're given a feed taken from your local broadcaster, depending on your location.
It's important to realize that there's nothing legally required about the current system. There have been rules on the books for years (some of which are likely to be eliminated shortly) about local broadcaster exclusivity. These rules allow a broadcaster to take quick action, for instance, against a cable system that is carrying the signal of a network affiliate from a different market. But these provisions only apply if the network has actually granted exclusivity to the affiliate–nothing stops a network from just offering a feed of its programming directly to cable operators or online services, apart from contracts that it has entered into. (Even without the local exclusivity rules, broadcasters and networks could still enforce exclusivity via contracts and normal contract enforcement.)
Nevertheless, under the current system, cable systems tend to deal with local broadcasters or their representatives, not the actual network. Sometimes, cable operators might prefer to just have one single negotiation with the network. But for the most part they are large, infrastructure-heavy businesses that are already present in the communities they serve. By contrast, a new entrant to the video marketplace might want to avoid having to negotiate with lots of different broadcasters across the country. It would be much easier for it to just carry a network feed, or get the network to secure an agreement from each of the affiliates on its behalf.
This reportedly is what a few online video providers have done. It seems like a good deal for the affiliates, since it ensures that online video users are still watching their programming stream, with their ads and their local programs, in their local markets.
However, according to the Wall Street Journal, affiliates are balking. Despite the obvious inefficiencies, they would rather negotiate with various online providers themselves. I'm not sure this is in their best interest. If they prevent networks from easily offering their content to new online services, the networks might eventually start cutting them out of the equation entirely.
The Journal piece mentions the FCC's proposed item that would recognize that certain online video providers have the same legal status (“multichannel video programming distributor”) as cable companies–meaning they would be brought under the existing retransmission consent rules. (This is a very complicated issue and there's much more to it than that.) Public Knowledge strongly supports this idea–but it's important to point out that nothing about it would somehow require that online video services negotiate only with local broadcasters. Even assuming the non-duplication rules were still in force and they applied to online video services (which is questionable, as they specifically use terms like “cable community unit” and “satellite carrier”), nothing about these rules or the retransmission consent system obligates networks to distribute programming exclusively through the affiliate system. (In fact, much network programming already is available online via on-demand streaming services.) So while the online video action at the FCC might symbolically underscore the role of affiliates in network programming distribution, it would have little actual effect.
I don't have an opinion about money disputes between networks and affiliates. But I think most affiliates realize that giving consumers more options for video services that carry their content is good for them, both financially and in terms of maintaining their audience. But the way to encourage new entry into video distribution is to lower barriers to entry, not come up with new ones. An insistance that new online video companies can only negotiate with local broadcasters directly if they want to carry their signal, seems like a path that will end up with their signal not getting carried at all. That's not good for the broadcasters, and it's not good for the viewers who want to access the same stations they're used to.