While negotiations between Fox Broadcasting Company and the Fox Affiliates Group remain at an impasse (with Sinclair being the only one so far to have signed a deal), over sharing retransmission fees affiliates collect from MVPDs, RBR-TVBR spoke with affiliates off the record and got a few insights.
The chair of the affiliates group, Brian Brady of Northwest Broadcasting, claimed that that Fox is not negotiating in good faith in a letter to affiliates, and will not meet with the negotiating committee for the group. Instead, it is attempting to negotiate with each station or group directly.
We asked affiliates:
Does this split threaten the “economic viability” of some smaller market Fox affiliates?
“Yes, basically they are threatening, ‘tough, if it doesn’t work for you, we’ll go somewhere else or just feed directly to the cable company. Small market affiliates don’t have nearly the leverage as a larger group or the networks when it comes to negotiating with the MVPDs.”
Does this split of retrans revenue have more profound ramifications for smaller affiliates than did Fox’s “Inventory Buy-Back” plan which you also spoke up against a few years back?
“The Inventory Buy-Back was horrible. But there’s a way to do a deal that makes sense and Fox is being very aggressive. All of the other networks have been much more reasonable and they understand that’s it’s going to take a little time to get this where it needs to be. And there is no affiliate out there who is saying they don’t want to pay the networks, because we all believe it’s important for both the networks and stations to have a significant dual revenue stream. You can’t continue to compete with cable when cable s taking down $30 billion in programming fees and the broadcasters are taking down less than a billion. The broadcasters represent 40-45% of the viewing of any cable or satellite system.”
What gross volume of retrans revenue (before split), per sub, are we speaking about?
“Fox is asking for 25, 35, 42 and 50 cents over four years.”
What will it take for Fox and the Affiliates Group to get back to the table?
“I don’t know. Fox is pretty resolute. The affiliate group would like to find a deal that makes sense. The affiliates are looking for a reasonable path that they can continue to grow their revenues and make the investments in local news and other things they have to do, while supporting the network and help make it strong.”
What are some of the biggest reasons negotiations have broken down? How is this resonating within the affiliate group?
“They hold all of the cards. They have a lot of leverage and are determined to get this money. They don’t care, necessarily, about what ramifications it has between the partnership of affiliates and the network. The affiliate group feels like they want to be supportive of Fox and they want to build that dual revenue stream for the network, but they think Fox is being excessively aggressive as compared to all of the other networks and what is reasonable to think that the affiliates can achieve.”
What about Fox negotiating with each station or group directly?
“The problem is they report it as a negotiation, but in reality it is a demand. If you want to continue to be a Fox affiliate, then you are going to pay this money. And by the way, it doesn’t matter whether or not you are going to get it from the cable system, you are going to pay it anyway. 100% of the risk is pushed down to the station. So if the station has to go off the air and spend a million, two or file million dollars to get the retrans number, there’s certainly no sharing in that.”
RBR-TVBR observation: Sounds like the only way to get leverage against Fox on the matter is for the entire affiliates group to band together against them, but there are other stations in many of these markets that Fox could then go to—maybe even Class A’s with must-carry on cable. Fox and its affiliates have always had a strong relationship, but this time around the affiliates think Fox is not acting in the spirit of partnership. It does seem that it will be tough for the affiliates group to band together. It’s not like a union negotiation, and the deals are struck separately.
