American film/TV studios might have made another strategic blunder. First, they sold their best content to make Netflix a major streamer, and, eventually, their major competitor. And now, the studios are failing to own more of their TV affiliates.
The U.S. TV broadcast market is now dominated by four networks: ABC (Disney), CBS (Paramount), FOX, and NBC (Comcast). Each network covers the U.S. with their own TV station and with affiliates. ABC has eight O&O and 248 affiliates; CBS has 15 O&O and 199 affiliates; FOX has 29 O&O and 241 affiliates; and NBC has 12 O&O and 232 affiliates. To every TV network each viewer is worth an estimated $0.23 per hour in ad revenue.
Similarly, there are 10 large TV station groups in the U.S. with 25 or more local TV stations. Of these, the five largest are Nexstar (197), Sinclair Broadcasting (193), Gray Media (180), Tegna (64), and Scripps (62). Recently, the FCC (the U.S. broadcasting authority) and the U.S. Justice Department both cleared the $6.2 billion merger between Nexstar Media Group and Tegna, but a U.S. federal judge later halted the deal.
Based in Irving, Texas, Nexstar operates The CW TV network, while Tegna is based in Tyson, Virginia. Combined, the group would reach 60 percent of the nation’s TV homes (current federal laws limits any one company’s reach to 39 percent of U.S. TVHH). The Nexstar-Tegna merger is favored by U.S. president Donald Trump, who reported that a bigger Nexstar would balance out “the fake news [of] the national TV networks.”
The danger for U.S. TV networks would be that groups like Nexstar-Tegna, or a potential Sinclair-Gray merger (following Gray Media’s move last summer to acquire Block Communications’ five local TV stations for $80 million) would find it more profitable to form their own TV networks rather than pay “reverse compensation” in order to carry networks’ fare and also get the little more than 50 minutes per week of local (ad time) inventory. High content costs are reportedly what’s driving the flurry of local TV station mergers.
Considering that local TV stations already produce local news, which are some of their most watched programs, local TV station groups could see it as more advantageous to develop their own TV networks, each covering most of the U.S.’s 210 DMA (TV markets), by pulling their local TV affiliates out of the legacy networks. In this case, the new networks would produce or commission national news programs and do barter-syndication for most of the rest of the time slots. For the remaining local TV stations there would be a bid of affiliation requests and networks would have to go back to paying affiliate compensation.
Yes, the networks could be covering areas not covered by TV broadcast affiliates via Internet, but viewers prefer local TV stations for news and weather.
Leave A Comment