Craig Birkmaier wrote:
The problem here is how the revenue pies are cut up. The media
conglomerates do not need local broadcasters anymore. Remember, the
reason we have this market structure is that the networks needed to
get their programs into American homes. The FCC regulations prevented
them from owning all of the affiliate stations, so the networks
started paying local broadcasters to carry their programs. Network
compensation was a big deal back in the days when it was difficult to
justify the cost of getting a license and building/operating a
broadcast facility. In those early years, it was nearly impossible to
make a profit without network compensation.
Today the stations are often sending money back to the networks - and
they have given back a lot of the important commercial inventory
within and adjacent to popular programs. Simply stated, the local
stations are bringing in about $23 billion a year. The networks are
getting about 40% of that through their O&Os; the rest is coveted by
the conglomerates, but out of reach because of the ownership caps.
Wait. They get 39 percent of that through O&Os, when they have that many
O&Os, and they get something more through the affiliates, it sounds like
you're saying. Which is a perfectly valid OTA model, IMO. In fact, it's
a more correct way to operate, if you want OTA broadcasters to compete
on a level playing field with the MVPDs.
The cable and DBS services allow the conglomerates to have a national
footprint. They do give back some ad inventory to the operators,
allowing cable and DBS to generate about $4 billion in "local" ad
revenues (the DBS services run the same ads everywhere when they
insert ads into cable networks).
Bottom line, there is NO REASON to give broadcast affiliates access to
content that is exclusive cable/DBS networks. And there is no way that
local broadcasters can compete with cable and DBS in terms of
delivering those monthly subscriber fees for these networks.
If the money is flowing from O&Os (the ads) and from affiliates *to* the
conglomerates, then it should only be up to the broadcasters to decide
what they should or should not incorporate into their multiplexes. There
is always good reason for the congloms to sell programming to local
broadcasters, if local broadcasters pay an amount that is competitive
with what the other distribution media can afford to pay.
But of course, for this to work, OTA broadcasters have to be allowed to
operate as efficently as possible. For instance, station groups have to
be allowed to cover the entire country (like DBS does). They should not
be saddled with a high percentage of "local content," that only drains
their resources. They should be allowed to operate more on autopilot,
like radio stations, if that's what it takes.
OTA broadcasting has the advantage of being the most efficient way to
get the bits out there. So let the ABC affiliates decide if they can
afford to air ESPN, within their spectrum allocation. If ABC affiliates
can be run efficiently, then they have a chance. Instead, it sounds like
we're telling them ahead of time that they can't afford this, and we're
layering on anti-competitive restrictions (exclusvity agreements,
national caps, what have you), to be absolutely sure that they won't
even get a chance.
Always the optimist!
Not really "optimist." It's just that if something isn't being done
right, but the problem is in the sloppy and careless implementation
rather than in the standard, then the fix is not only possible, but it
can be introduced at any time, by any of the players. The fix doesn't
have to be centrally managed.
Bert
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