• by Wayne Friedman , Staff Writer, May 8, 2023

Maybe it's not always such a good thing to be part of a TV network -- especially in the modern streaming world.

CBS Television Stations has decided to drop eight TV stations' affiliations with the CW network, after CBS' parent Paramount Global and Warner Bros. Discovery decided to sell their majority interest in the network to the largest owner of the U.S. TV stations -- Nexstar Media Group -- a deal that closed last October. 

It used to be a solid argument that a TV network affiliation could be a strong financial component of a TV station's financial makeup.

Stations could get top-quality prime-time and other daypart programming -- as well as major marketing support.

With high-valued programming, they could sell higher-priced local TV inventory, from big prime-time shows to local marketers. Stations could also see higher retransmission fees.

With regard to the latter, there is concern that retransmission fees for all TV stations could sink dramatically due to increased cost-cutting of traditional and virtual pay TV providers.

Whereas retransmission revenues now could represent 50% of a TV station revenue, this could drop to 39% in three years, according to BIA Advisory Services.

Total revenue from retransmission fees has slowed an estimated $14.8 billion this year -- up 3% from the year before, according to S&P Global Market Intelligence. In addition, TV networks continue to ask for ever-higher fees from their affiliates -- so-called “reverse compensation” fees.

Part of the problem is that with the growth of virtual pay TV providers, both TV networks and TV stations see this as an opportunity to reset long-standing revenue-share models.

At the same time, TV networks also now want more of their linear TV viewers to also watch more of their content on their owned premium services -- like Paramount+, Peacock, and Hulu. All that means siphoning off viewers that would normally watch TV affiliates' local content.

For CBS' part, it will offer up a new model for these stations that will consist of local programming, live sports, and shows from Paramount Global's big library.

Now, CBS will have a total of 13 independent TV stations and 14 stations with CBS-network affiliation.

It is significant that Nexstar's big plans for CW included shifting to decidedly lower-cost unscripted programming from higher expense-scripted fare. Recently, the CW also added the likes of professional golf from new group LIV Golf. 

This would dramatically shift CW's core audience to a much older audience group from its traditional 18-34 and 18-49 viewers.