Could Retransmission Fees Save the Broadcasters?
The fight over retransmission fees between Fox (AAPL) and Time Warner Cable (TWC) last week highlights an increasingly contentious relationship between the big four broadcast networks and the cable companies that carry them.Other broadcasters will most likely join the battle for retrans fees over the next few years, with CBS (CBS) and ABC (DIS) expected to push harder for their share of cable subscriber fees. While broadcasters seek to offset a weakening ad market as they try to compete with cable networks, cable providers are being forced to negotiate higher fees for all of their programming—fees that will eventually be passed on to subscribers. It's a tussle that will result in higher costs for everyone, and it's happening at the same time broadcast TV is becoming less relevant to viewers, for a number of reasons. Broadcasters have seen ratings slip over the past 10 years as viewers increasingly turned to cable for TV programming. According to research from Nielsen, broadcasters owned a 46.8% household share in 2000, compared with cable networks' 41.2%. Cable's household share has since risen to 60.6% while the share among broadcasters has dipped to 32.1%. That's happening as the cable nets are emboldened by high-quality original programming. USA Network and TNT, once just home to second-run movies and syndicated TV shows, have had a number of hits with original scripted series such as Burn Notice and The Closer. ESPN, which draws the largest share of cable fees—around $4 per subscriber on average—has made Monday Night Football a hit, averaging 14.4 million viewers per game this NFL season. little broadcast fare is time-drivenBroadcasters would argue that cable nets have an unfair advantage because they derive per-subscriber fees from cable companies and other distributors, in addition to advertising revenue. The dual-revenue stream is at the heart of the broadcasters' desire for retrans fees that would put them on a more equal footing with the cable competition. The broadcast model is also being undercut by Web video and, to a certain extent, the broadcasters' own Web video strategies. The onset of Hulu, while raising awareness of some broadcast programming, has allowed users to catch up on their favorite TV shows without actually tuning into them. While some programming—in particular, live sporting events and reality shows such as American Idol—will still draw audiences when they air on network TV, the vast majority of video that shows up on Hulu is just as entertaining a week after it airs. Broadcasters say they need retrans fees to continue producing high-quality original programming. That might be true, but there's probably no way to reverse the larger trends affecting their audience. While they seek to get paid for their programming, they're becoming less important to viewers, advertisers, and ultimately, to the cable companies they're pressing for retrans fees. Also from the GigaOM network: Mobile Apps: The Ultimate Threat to Search Engines? Viva La Wi-Fi! The Green Guide to CES 2010 10 Political Connections in Greentech Does the Distinction Between Online and Offline Still Matter?