Those shows, and the rest of Fox’s prime time, will be carried instead by a competing station in southern Missouri, because KSFX’s parent company, the Nexstar Broadcasting Group, refused to pay a new fee imposed by Fox, a unit of the News Corporation.
The fees, sometimes called reverse compensation, are changing the relationship between the broadcast networks and the local stations that carry their programs in big cities and small towns across the country.
In recent years, the stations — including some that are owned by the networks — have wangled lucrative new fees from cable and satellite operators for the right to retransmit the local stations’ signals. Now the stations are finding that the networks want a big piece of the bounty.
It is the second front of the TV retransmission war.
The networks say they need the new fees from stations to keep supplying prime-time programs and sustain profitability for their parent companies, imitating the cable channel model of a dual revenue stream of advertising and subscriber fees.
“We think that being a Fox affiliate is worth something,” said Michael C. Hopkins, the president of affiliate sales for Fox, which has taken the most aggressive stance of all the networks and has severed its ties with three Nexstar-owned stations this year.
Most stations have agreed to the new terms, but others have objected. Perry A. Sook, the chairman and chief executive of Nexstar Broadcasting, said Fox’s proposal was unprecedented in its size and scope.
“Given the limited amount of regularly scheduled programming Fox provides to local stations compared to ABC, CBS and NBC, we just cannot make their numbers work,” he said in an e-mail message, declining to comment further. (Fox supplies two hours of prime-time programming each night, while others supply three.)
The money at stake is significant. SNL Kagan, a research company, estimates that retransmission fees to local stations from cable and satellite operators accounted for $1.14 billion in revenue last year, and that the revenue will grow to $3.6 billion annually by 2017. The fees are passed on to consumers in the form of higher bills for cable and satellite services.
The government is contemplating changes in the retransmission negotiation process, since some cable companies say it currently favors the stations and causes occasional blackouts for customers. One such blackout of the New York-area ABC stations for Cablevision customers last year made national news because it cut off the beginning of the Academy Awards telecast.
Once stations have the fees, the networks believe they should have a “fair share,” as Leslie Moonves, the CBS Corporation chief executive, said at a media conference in New York last month.
“If a station is looking at what’s really bringing in the money, it’s the N.F.L., it’s ‘American Idol,’ it’s ‘CSI,’ it’s the prime-time strength,” Mr. Moonves said. “It’s not the local news or, you know, ‘Regis and Kelly’ at 9 a.m., you know, that’s bringing in the big bucks.”
In the past, local stations handed over advertising time to the networks in exchange for prime-time programming and other benefits, like the prestige of a network affiliation. (David C. Joyce, an analyst for Miller Tabak Company, projects that a station that loses a network affiliation could lose 50 to 75 percent of its value.) But as viewership — and top-tier programming — gradually moves to cable, the networks say they need a cut of the retransmission fees.
The payment plans differ depending on the network. NBC, for instance, is in talks with its affiliate board about negotiating retransmission deals on behalf of the affiliates, then splitting the fees down the middle, but that plan hinges on its acceptance by a sufficient number of affiliates.
Brian Lawlor, the chairman of the affiliate board, said he was hopeful that “we will finalize the details in the coming weeks that will allow NBC to introduce a structure to the affiliate base that will be positively accepted.” NBC is controlled by Comcast, the largest cable company in the country.
NBC said in a statement that the arrangement would be a win for both the network and the stations because both “need to develop additional revenue streams to offset the high cost of producing local and national programming and news.”
Fox is going a different route, insisting on a flat fee that is not directly tied to stations’ retransmission fees. Fox’s terms are not public, but the network is said to expect roughly 25 cents a month per viewer who receives the station via a cable or satellite company, escalating after the first year. In a letter to stations last winter, Mr. Hopkins wrote that if Fox’s proposal did not work for some stations, the network would “pursue different distribution channels.”
He added, “We don’t want that to sound like a threat, but it is a fact.”
Though the Nexstar disputes with Fox have been striking, most of the negotiations between stations and networks have happened without incident — a point of pride for Fox’s competitors.
The payment plan set up in the past two years by ABC, a unit of the Walt Disney Company, is a combination of Fox’s plan and NBC’s proposed plan: a flat fee or a share of a station’s retransmission fees, whichever is greater.
On top of several retransmission deals for its owned stations, “ABC has successfully completed negotiations with more than 60 percent of our affiliate coverage for the network,” a spokesman said.
Article source: http://feeds.nytimes.com/click.phdo?i=0e397e83a5a5aeeb9f170fb17d349a63
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