Now that TV stations are shoe-horning their business model more like cable networks, one wonders when the complaining will stop.
Right now, TV stations are moaning about the loss of big
marquee sports like the Bowl Championship Series. But they say there's hope -- all because of
retransmission fees, similar to
the subscription fees paid to cable networks.
TV stations are starting to digest the financial power of getting a dollar or more per subscriber -- which, for many cable networks, is good
money.
Even when program ratings never made advertising sense for cable networks, they always preened about their duel-revenue stream business model. For many networks, that was a nearly
50-50 stream of revenues -- subscriber fees and advertising money.
But that's not the equation for TV stations -- yet. The revenue from retransmission fees is still a fraction of the
dollars they get from advertising sales.
For example, Perry Sook, president/CEO of Nexstar Broadcasting, says revenue from retransmission deals (and some Internet revenue) is bringing in
$30 million per year. In 2007, Nexstar had $266 million in net revenue. That comes to a little better than 11% of all its revenue.
The real dollars for national programming, however, are
what network affiliates give back to their networks -- now called reverse compensation. Local cable systems just call them the monthly subscribers' fees they pay to get cable networks.
Sook
figures that between football ad inventory give-backs to Fox, and other services, he is giving Fox around 7 cents a subscriber. All that sounds nice. But cable operators give much more for their
cable networks -- with the likes of ESPN getting better than $2 a subscriber.
That's hard to compete with. And it's that disparity -- what cable operators pay for cable network programming,
and what TV stations are now, somewhat grudgingly, giving to pay for specific programming such as sports-- that really shows some weakness in the broadcast business model.
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