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02.03.2006
Originally featured on BroadcastEngineering.com
Civil war simmering between networks and affiliates

The iPod revolution is apparently starting to take a toll. The Wall Street Journal reported last week that a "civil war is simmering beneath the surface of the television business." On one side are large television networks selling their premium programming to iPod owners and on the other, local television stations who want a piece of the action.

Local stations, said the WSJ, are demanding that networks include them as partners in digital ventures. “We aren’t going to be accidentally — or purposely — left out of the equation,” David Rehr, president of the NAB, told the newspaper.

ABC and NBC have made deals with digital media companies such as Apple without notifying affiliate stations. Network executives told the newspaper their contracts provide them that right.

However, WRAL-TV in Raleigh, NC, said it is in early discussions with CBS for an arrangement that might allow the station to stream network shows live on its Web site and then offer them on-demand afterward. Both versions would include commercials, with the live stream offered for free, and on-demand downloads sold for a small fee.

WRAL hopes to make its plan palatable to CBS by using technology developed by Decisionmark that allows stations to limit the geographic boundaries of their Web sites. Only viewers living within reach of a station’s on-air signal would be able to watch or download shows through their sites.

CBS declined to comment.

The WSJ said local stations are worried that when the networks make shows available on iTunes and Google’s new video service it will erode ratings, and thus ad rates. Also, owners of local stations see the distribution of shows online as a potentially lucrative business and want to be part of it, especially in light of recent declines in their own terrestrial broadcasting businesses.

The station business is increasingly under attack, the newspaper said. TV station advertising dropped eight percent in the first nine months of 2005 to $12 billion. Stations also face enhanced on-demand offerings from major cable operators; the proliferation of sports events on satellite and cable; and the shift online of local news and weather services.

On the other hand, the networks, said the newspaper, see the bulk of revenue from these digital ventures as theirs — primarily as an antidote for escalating production costs. Stations, the networks said, aren’t the ones financing dramas that now cost an average of $2 million an hour to produce. Program executives also said that making episodes available on the Web — in some cases just hours after they air — actually helps station ratings.

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