US broadcasters consolidate efforts & affiliates for streaming deals

The US “Big Four” national broadcast networks – CBS, ABC, NBC and Fox – are desperate to get their content in front of viewers, particularly the younger viewers that now eschew both traditional and antenna-delivered TV for streaming packages like Netflix, Sling TV and DirecTV Now. But the national broadcasters have run up against a choke point: the networks of independent affiliate station groups that want a bigger piece of the licensing revenue pie. Now, broadcasters are ramping up their efforts to consolidate licensing agreements on behalf of their affiliates in hopes of streamlining these retransmission negotiations.

This week, three of the national broadcasters have reached a settlement with FilmOn, an online video network that’s been engaged in a long legal battle with Fox, CBS, ABC and NBC over streaming linear feeds of over-the-air broadcast TV stations as part of its Internet-based streaming TV service. The settlement is just one piece of a larger puzzle that broadcasters have been forced to cobble together in the face of tectonic shifts occurring in the TV ecosystem.

CBS, Fox, NBC and ABC each own and operate a handful of stations across the US, but the majority of the US local markets are covered by affiliate stations that license content from the national networks. Pay TV providers in the US are legally obligated to carry local station programming as part of their pay TV packages, and in those MVPD agreements, affiliates negotiated licensing agreements on their own behalf in local markets. But as viewers and content moved online, affiliate programming did not.

Two start-ups, FilmOn and Aereo, both tried to get broadcast content online by streaming linear feeds of broadcasters’ free-to-air programming, in Aereo’s case, using tiny personal antennae as a technology loop-hole to legal internet distribution of that content.

First, the national broadcasters went after Aereo for streaming local station content as a “cable provider” without paying the proper retransmission fees; FilmOn founder Alki David responded by asserting that if online video providers are cable providers, then they surely are subject to the same compulsory carriage agreements that mandate legacy pay TV providers carry local station channels. Broadcasters sued FilmOn, too, despite the fact that FilmOn was paying retransmission fees, and after a string of court wins and losses, CBS, NBC and Fox have decided to settle the case.

Another factor here is that national broadcasters and affiliate station groups have locked antlers over who gets to control streaming licensing negotiations. Station groups took the lead on retransmission negotiations with legacy pay TV service providers in the heyday of pay TV – bolstered in part by legislation that required MVPDs to carry all local channels in their respective footprints. But in the world of OTT, the national broadcasters have attempted to strong-arm the negotiating keys away from the affiliates.

All of this is to say that local station owners have essentially been shut out of streaming TV packages, which has left them and their ad-based monetization streams even more vulnerable to the shifts in viewing habits. The situation has become so troublesome that CBS and ABC had troubles getting their affiliates to participate in their own TV Everywhere streaming apps.

Amid cord-cutting and declines in linear TV ratings, national broadcasters are hoping to band together their smaller affiliates in order to sign streaming deals that’ll cover larger segments of the US market. Three of the big four have pledged new initiatives that’ll see licensing agreements streamlined for streaming packages.

CBS was the first US broadcaster to be embarrassed by its affiliates’ absences: CBS first began aggregating its affiliate stations back in 2014 for its own CBS All Access SVoD service. CBS created a network-affiliate partnership to enable its smaller stations to opt-in to OTT service, and later for Sony’s PlayStationVue, which is now carrying local CBS station content in 100 markets. CBS recently announced it’s expanding that partnership program to accommodate future licensing deals with the likes of Hulu, YouTube TV and other Internet TV providers in mind.

CBS’s agreement with Sony for PlayStation Vue is a great example of this power struggle between affiliates and national networks: affiliate stations in the past would receive retransmission fees from the MVPD, and then hand over a portion of those fees to the national network as part of its affiliate agreement; but under CBS’s deal with Sony, CBS gets all the money, and divvies out a portion of that to the affiliates that have opted into the service.

During NAB last month, Disney’s ABC announced Clearinghouse, a platform that’ll help offer station partners opportunities to sign up for digital distribution by allowing them to opt-in to pre-negotiated streaming deals for local station live linear TV feeds. The initiative will also afford affiliates opportunities for VoD distribution. Disney says it has signed up 160 affiliates for the program, spanning stations owned by Sinclair Broadcast Group, Hearst Television, Tegna and EW Scripps. Participating stations will now be available on the WatchABC app, Sony’s Internet TV service PlayStation Vue, Google’s YouTube TV and AT&T’s DirecTV Now, as well as part of Century Link’s upcoming OTT product.

NBC and its television affiliates board announced its own opt-in agreement for future OTT streaming deals and TV Everywhere distribution rights. According to NBC, the agreement has been in the works for several months, and the timing could indicate that the agreement was part of the hold-up for NBC signing on to Hulu’s live Internet TV service.

Negotiating deals on behalf of hundreds of affiliate networks is complex, and success for these ventures will likely depend on how friendly the deals are to the affiliates. CBS – who has made the most progress on this front – was able to persuade affiliates in part because CBS is allowing affiliates to retain all their own ad inventory, in addition to receiving money from subscriptions in a revenue-sharing agreement.

In the meantime, some of the independent station groups are launching their own OTT products, whether that be on station-owned Websites, or on third party platforms such as Facebook, Roku or NewsOn, a local news aggregating app.