For many of you in TV news, you will already know this, but it is worth sharing.
A longtime giant in TV news and news management sent along this email to FTVLive explaining why your cable bill is now as high as some people's car payments.
The former executive writes:
FYI, the revenue local stations derive from those who carry their signals (e.g., DirecTV, Dish TV, your cable provider, or streaming service) are based on households served. It is not dependent upon actual viewing. Ergo, if you have cable and never watch your local ABC affiliate, that station still collects money from YOU.
Revenue from retrans is substantial. It is not unusual for a local, network affiliated station, to collect .75 or $1.00 PER MONTH, for EACH SUBSCRIBER. Take a market like Seattle, for instance. There are roughly 1,700,00 TV households in the DMA. Let’s say combined cable and satellite distribution is 70%.
70% of 1.7 million is 1,190,000
If a station negotiated 75-cents per subscriber, its take would be $892,500 PER MONTH, or $10,710,000 PER YEAR.
The networks don’t like the idea of the locals gobbling up all that money, so they’ve negotiated with stations to collect a big chunk of it for themselves.
Years ago, the networks PAID their affiliates to carry their programming. Today, no network pays for carriage. FOX ‘invented’ what became known as ‘reverse compensation’ when it became a distributor of NFL games. The only way it could afford to pay the huge rights fees was to pass a portion of the cost on to its affiliates (who, after a lot of bitching, were only too happy to pay.)
The problem is that this continues each time a retrans deal is up. When the deal is up, the TV station demands more money from the cable company to continue to carry their signal. The cable company says "no", the station falls off the system while the two sides negotiate and in the end they agree on a price. Often the price is lower than the TV station wanted and higher than the cable company wanted to pay.
But, once that deal is reached, you know that the cable company is not going to eat that extra money they have to put out, so they pass the increase onto the viewer.
As cable bills continue to rise, more people are electing to cut the cord and give up on cable (or satellite) TV.
In other words, TV stations and networks are slowly pricing themselves right out of business.