Local TV Creates Hurdle to Streaming

The big networks and their affiliates are wrangling over which of them will be the ones to negotiate with the new generation of direct-to-consumer streaming services, and what each side’s split of monthly subscription fees should be. The networks have argued that they are the ones these new entrants should be dealing with. But affiliates have long negotiated their own carriage deals directly with cable and satellite-TV providers, and they aren’t all willing to cede this power in the digital realm.

One major inflection point will come as the Federal Communications Commission considers a proposal to classify “over the top” Web TV services like Sony’s in the same way that traditional pay-TV providers are classified, which is expected to be taken up as early as this fall, according to people familiar with the matter. Such a ruling would mean, among other things, that local broadcasters would be able to negotiate for carriage fees with streaming players in the same way they do with traditional pay-TV providers. The truth is, neither side can do a streaming deal without the other. Networks need the affiliates because, beyond the stations they own, the affiliates are the ones that actually negotiate with traditional cable and satellite providers for carriage fees, after securing exclusive access to their network’s programming in their market. The stations share the carriage revenue with the network.