• by David Goetzl  @dgoetzl, April 1, 2009

If broadcast networks opt to effectively turn themselves into cable outlets and bypass local affiliates, it would be an act of "inestimable stupidity," the chief of a station group said Wednesday. With networks deriving revenues from advertising only, speculation has been they might pursue direct distribution via cable, satellite and telco TV operators, which would allow them to also collect lucrative carriage fees.

But Bonten Media Group CEO Randy Bongarten suggested that losing the ubiquitous distribution affiliates provide -- virtually free -- would cause ratings and ad revenues to drop significantly at the networks. And the money coming in from distributor payments would not make up for that loss in ad dollars, he said.

Affiliate bypass would also force networks to undergo the arduous process of cutting the carriage deals with distributors -- companies they have not always had the smoothest of relations with.

Going with affiliate bypass "just doesn't make sense -- that's not shooting yourself in the foot, that's shooting yourself in the head," Bongarten said on a panel at a New York industry event.

One reason that network ratings would fall, he said, is that stations stripped of an affiliation would continue to operate and cut into the broadcasters' audiences. "We're going to develop other networks -- other programming streams," he said. "We're not going away."

Three-year-old Bonten is a partnership between Bongarten, former president of Emmis Television, and a private-equity firm. It purchased the CBS affiliate in Nashville -- the 29th-largest DMA -- last year, but the remainder of its 15 stations are in small markets.

Separately, there has been speculation that networks will seek a cut of the retransmission consent payments that affiliates are now collecting from distributors.

"The networks are going to want some of that money ... the jousting has begun in that regard, and I think we can expect that to continue," said Bongarten. Bongarten did acknowledge that "you could certainly make an argument" that by providing stations with programming -- prime-time hits and high-profile sports events -- that drive retrans fees for the affiliates, networks might have a case.

Still, affiliates are often asked by networks to help pay the rights fees for sports, such as the Olympics or the NFL.

Bongarten was joined on the panel by Colleen Brown, CEO of Fisher Communications, the owner of a group of stations in the West, along with David Amy, CFO of the Sinclair group, which owns large-market network affiliates.

Amy said networks have been supportive of Sinclair's efforts to obtain retrans payments. There have been instances, he said, where during a dispute, Sinclair has pulled a station off the air and distributors have been "unscrupulous" in beaming in a station from another market. He said the networks have stood with Sinclair in objecting.

Brown said she expects similar support going forward as Fisher looks to increase retrans revenues. "My expectation is the networks are going to step up and help us get the value of what we're worth," she said.