DISH Chairman: ‘Local Affiliates Are a Tax, We Cannot Be Their Bank’; Are Local Channels on Their Way Out for Streamers?
It’s a precarious time to be a local affiliate of a major network these days. As linear viewers decrease and streaming competition increases, local channels are struggling to find ways to bridge the gap created by lost revenue. Oftentimes, retransmission fees are upped for cable providers and live TV streaming services, putting them in a situation of having to make hard choices about whether they’ll continue to carry affiliates.
But there are other potential pitfalls for affiliates; the live TV streamer fuboTV is the most recent company to drop local affiliates, although not of their own choosing. The streamer negotiated a new deal with CBS to continue to carrying the affiliates, but when the contract was taken to the local channels, many of the largest station owners declined the offer, leading to local CBS channels in 160 markets across the United States being removed from the streamer. The channels were replaced by a national feed of CBS, which has some of the same shows but no local content.
Executives at Sinclair Broadcasting Group, which owns most of the affected CBS affiliates, think the dispute will be resolved sometime in the next few months. But according to DISH co-founder and chairman Charles Ergen, more live TV streamers may end up dropping local broadcast networks in the future. As live sports and prestige series are shifting more and more to streaming, it becomes harder for providers to justify the climbing cost of carrying local channels.
“The fact that the local networks now are going the path of regional sports where the cost gets so high that it’s more — any rational company we’ll make more money by not having the service,” Ergen said. “And the broadcasters themselves are cutting back on the content, and so they’re not producing… the high-value drama shows and stuff are going somewhere else, to [streaming].”
Keeping retransmission fees for local broadcasters at the rate where they now are is unsustainable in Ergen’s view. DISH is losing satellite customers in part because of the cost, exacerbated by the growing retransmission costs.
“They haven’t got the memo yet,” Ergen said. “And every time they lose a customer, they used to come back to them. But those [local] channels, they are not coming back to their local news, they are not coming back to those drama shows because now they’re watching something on HBO or Netflix and they’ve got hooked on some other show, and they’re just not coming back. And the fact of the matter is that any customer that wanted [broadcast channels] from us has left DISH. So now it’s a tax if we put them back up.”
Ergen has a definite point, in that broadcast TV in general is fading as a source of media for consumers. A recent survey found that 76% of U.S. customers still use broadcast channels, but that other sources, such as ad-supported streaming, are gaining fast.
The DISH chairman sympathized with local affiliates, but made it clear that DISH and its live TV service Sling TV were not interested in simply handing out cash because their business model has changed.
“It’s a shame because the local broadcasters are caught in a vice between the network and the distributors,” Ergen said. “So we have some empathy for their plight, but we cannot be their bank unless we get a return.
And right now, we don’t get a return.”
Indeed, local affiliates are getting the short end of the stick in the arrangement. They cannot negotiate with distributors directly, and instead are forced to either reject or accept carriage deals negotiated by the network they’re affiliated with. That arrangement is what led to the exodus of CBS channels from Fubo, and it may lead to more painful departures in the future.
The networks that have their own affiliated streaming services are likely hoping that’s exactly what will happen. NBC, for example, recently made live streams of local NBC affiliates available on Peacock’s Premium Plus tier in all 210 major U.S. markets.
While it would be difficult to imagine live TV streaming services not having broadcast networks at all, it might be more cost-efficient to opt for national feeds — like fuboTV is doing in markets where it lost the local broadcast. By focusing on the national networks, those feeds can be bundled with cable channels owned by the same companies, ensuring that the networks have distribution, but also that the payouts for each individual local channel doesn’t drive up the cost for consumers.
Sling TV
Sling TV is a live TV streaming service that helps users save money with the option of two distinct plans. The $40/month “Sling Orange” plan offers about 30 channels, including Disney Channel and ESPN. The $40/month “Sling Blue” plan offers about 40 channels, including Fox and NBC local channels.