Commentary

New Concept In TV Station Compensation: Pay For Performance

After decades of networks paying affiliates to run their programming, networks now want a completely opposite equation, one where stations send checks to networks.  

Station executives are up in arms. But before they get too crazy, I'd go one step further: base that new financial equation on performance.

Bob Prather, president/COO of Gray Television, is complaining that NBC now wants money for its programming, just as cable networks get fees from their cable affiliates. But Prather is in a lather, especially that "our NBC stations are performing poorer than most of the other stations just because NBC's primetime schedule is so poor."

So the obvious answer: pay for viewer performance, just like advertisers. If a network under-delivers its audience guarantees to its affiliates, fees would be adjusted.

Extend this principle to all networks -- broadcast and cable -- and you can see where this is going. Back in the '90s, to get his new cable networks some cable affiliate coverage, Rupert Murdoch paid an astounding initial premium to get distribution -- $10 per subscriber or so, according to executives.

Broadcast networks have seen this financial change coming, and, in recompense, have given their station affiliates an advertising spot in the streaming of their network shows on their Web sites (or on the network players that reside on local TV stations' Web sites).

Sure, all this doesn't really amount to much right now. But network executives realize this is only a start.

Right now, station groups like Gray complain that the few network spots they get to sell in prime-time programming do little to make up for the damage low-rated network programming does as a lead-in to their local newscasts -- which are still the main revenue drivers for stations.

Gray could tell NBC this: If you do a better job, if your ratings climb by a specific percentage, we will pay you. If not, you get less  -- or nothing.

Both NBC and Gray understand this model, especially in dealing with TV advertisers who typically are promised certain viewership levels. That said, network scatter advertisers and local TV station spot advertisers don't usually get a formal rating guarantee.

But that doesn't mean TV programmers say "take it or leave it." There is always some quasi-verbal agreement to make everyone whole -- because the next day, the advertiser and TV station or network will still need to be in business with each other.  

With the new digital TV age putting pressure on the networks and stations alike, sharing the pain is good with any type of agreement. The TV industry may be moving a lot these days, but no one wants to leave it.  


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