Why Broadcasters Are Seeking Direct Negotiations with Streaming Giants

Recently broadcasters have found themselves in a particularly tricky situation They currently collect a significant portion of their revenue from MVPDsamp8217 retransmission consent fees amp8211 which will decline as subscriber counts fall Meanwhile network affiliates are negotiating direct deals with streaming services to offer broadcastersamp8217 local content reducing broadcastersamp8217 influence on the decisionmaking processThatamp8217s why a coalition of broadcasters is now pushing to negotiate directly with OTT streaming services touting the unique value of their local programming and perspectives on TV markets across the countryBroadcastersamp8217 shifting perspectives on revenue equalityThe business model for pay TV distribution has been stable for decades but the emergence of OTT is disrupting the delicate balance that previously existed between MVPDs broadcasters and network affiliatesAs OTT streaming continues to grow in popularity MVPDs are seeing declines in viewership subscriptions and advertising revenue The trend of declining MVPD subscribers means broadcasters earn less retransmission consent revenue for their content This is obviously bad news for broadcasters that depend heavily on that revenue to meet their numbersNetwork affiliates also feeling the downstream effects of declining pay TV revenue are negotiating more competitively with broadcasters to keep the reverse compensation checks flowing At the same time some network affiliates are trying to plug the revenue gap by using what some commentators call the streaming loopholeUnder current FCC rules MVPDs must negotiate carriage of local stationsamp8217 channels directly with broadcasters However vMVPDs services like Hulu Live YouTube TV and others can negotiate streaming rights directly with network affiliates for those exact same channels without input from the broadcastersOnce a deal is made between a network affiliate and a vMVPD the network affiliate is in a position to dictate revenuesharing agreement terms with broadcaster partners One example according to industry insiders is that some network affiliates are offering broadcasters a share of streaming revenue in exchange for higher reverse compensation feesNot only are broadcasters prevented from negotiating terms under the current rule but some network affiliates are leveraging special relationships with vMVPDs eg those owned by the same company to supply content at belowmarket rates This practice can reduce the value of revenuesharing arrangements between network affiliates and broadcastersBroadcasters push for direct negotiations with streaming servicesUnhappy with prevailing financial arrangements and under pressure to increase revenue some broadcasters are now advocating to close the streaming loophole The goal to negotiate directly with OTT streaming services for what they consider to be a more equitable share of streaming revenue based on the value of the local content they provideIn early 2023 the owners of 600 television stations formed an organization The Coalition for Local News to call for regulatory changes that would establish broadcastersamp8217 rights to negotiate streaming deals for their own content and as stated in a press release amp8220protect local broadcast newsamp8221The Coalition for Local News is among the parties arguing that the streaming loophole puts broadcasters at an unfair advantage in a competitive media ecosystem that includes much larger production distribution and technology companies For broadcasters to compete and thrive they say lawmakers must update FCC rules to ensure broadcasters get a seat at the negotiation tableShortly after FCC Chairwoman Jessica Rosenworcel proposed an investigation into the matter in July 2023 members of Congress challenged the FCCamp8217s scope of legal authority Cathy McMorris Rodgers RWA and Bob Latta ROhio issued a letter of warning stating the view that it is amp8220up to Congress to make updates not the FCCamp8221 Still some senators are encouraging the proceeding to continue to make sure amp8220our regulatory systemamp8230is not undermined by the explosion of new technologies that were not foreseen even a mere decade agoamp8221A highstakes regulatory battleAs traditional linear revenue declines existing stakeholders are turning towards digital distribution Experimenting with FASTVOD platforms and adopting digital finance best practices can help fill the substantial revenue However the pace of change has left some parties feeling locked out of crucial revenuesharing conversationsClosing the streaming loophole from a regulatory standpoint would give US broadcasters stronger rights to negotiate deals for their content and present new challenges to affiliates and vMVPDs Regardless of how the rules evolve stakeholders throughout the ecosystem will certainly continue to battle for their share of streaming revenueThis article was written by Karin Bleiler EVP ampamp GM of Revenue Solutionsamp160 who oversees the Onboarding Customer Success and Managed Services divisions at SymphonyAI Media she brings over 15 years of experience in finance accounting and licensing operations from numerous roles including her tenure at MPEG LA LLCPosted at MediaVillage through the Thought Leadership selfpublishing platformClick the social buttons to share this story with colleagues and friendsThe opinions expressed here are the author39s views and do not necessarily represent the views of MediaVillageorgMyersBizNet

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