– Image from the ad Fox has been airing during its programming.
As cable channels continue to attract more advertisers, the networks are losing money left and right. In response, they are seeking higher fees from cable providers. The most recent and publicized situation concerns Fox and Time Warner. Rather than pay Fox’s asking price, Time Warner is threatening to drop the network entirely.
Even worse, their audiences are dwindling and their affiliates are even demanding more money. These problems are causing many network executives to consider switching to a cable format. The change would be monumental.
That will play out in living rooms across the country. The changes could mean higher cable or satellite TV bills, as the networks and local stations squeeze more fees from pay-TV providers such as Comcast and DirecTV for the right to show broadcast TV channels in their lineups. The networks might even ditch free broadcast signals in the next few years. Instead, they could operate as cable channels — a move that could spell the end of free TV as Americans have known it since the 1940s.
The traditional broadcast model works like this: CBS, NBC, ABC and Fox distribute shows through a network of local stations. The networks own a few stations in big markets, but most are “affiliates,” owned by separate companies.
Traditionally the networks paid affiliates to broadcast their shows, though those fees have dwindled to near nothing as local stations have seen their audience shrink. What hasn’t changed is where the money mainly comes from: advertising.
Cable channels make most of their money by charging pay-TV providers a monthly fee per subscriber for their programing. On average, the pay-TV providers pay about 26 cents for each channel they carry, according to research firm SNL Kagan. A channel as highly rated as ESPN can get close to $4, while some, such as MTV2, go for just a few pennies.
Having two revenue streams — advertising and fees from pay-TV providers — has insulated cable channels from the recession. In contrast, over-the-air stations have been forced to cut staff, and at least two broadcast groups sought bankruptcy protection this year.
So rather than wait for the Internet to become a bigger source of income, the networks and local stations are mimicking what cable channels do: They’re charging pay-TV companies a monthly fee per subscriber to carry their programming.
The American Cable Association says its members — mainly small cable TV providers — have seen their costs for carrying local TV stations more than triple over the past three years. The group’s head, Matt Polka, says those fees have gone “straight to consumers’ pocketbooks” in the form of higher cable bills.
All this means for viewers is a higher cable bill. CBS, NBC, ABC, and FOX have always supplied their programming for free. The reason they’ve stayed afloat is because of ad sales, which are decreasing. If they do wind up severing ties with their affiliates and jumping to cable, consumers will have to pay for them like they would any other channel.