As TV viewers habits change and the TV business model changes along with, stations have relying more and more on retransmission fees to make profits.
Years ago the retrains fee was the cheery on top of the sundae. Now, those fees are a big part of station's profits.
But Bloomberg reports that DirecTV, Time Warner Cable and Charter Communications, taking a page from Aereo Inc., are considering capturing free broadcast-TV signals to avoid paying billions of dollars in so-called retransmission fees, said people with knowledge of the deliberations.
Aereo, which charges $8 a month for online access to broadcast TV, is locked in a court battle with CBS Corp. (CBS) and other media companies over the legality of its service. If Aereo prevails, cable companies could use the same approach to bypass the fees they now pay for network signals, said the people, who asked not to be identified because the discussions are at an early stage. Time Warner Cable has even considered buying Aereo, said one of the people.
DirecTV, Time Warner Cable and Charter Communications, taking a page from Aereo Inc., are considering capturing free broadcast-TV signals to avoid paying billions of dollars in so-called retransmission fees, said people with knowledge of the deliberations.
Broadcast TV companies petitioned the U.S. Supreme Court this month to rule that Aereo is an illegal operation.
“If found to be legal, the Aereo concept is very interesting, especially as it relates to retransmission consent fees,”Maureen Huff, a spokeswoman for New York-based Time Warner Cable, said yesterday. She declined to comment on whether the cable company would consider buying Aereo.
Justin Venech, a spokesman for Stamford, Connecticut-based Charter, declined to comment, as did Aereo’s Virginia Lam. Darris Gringeri, a spokesman for El Segundo, California-based DirecTV, didn’t return messages seeking comment.
“This threatens the retrans gravy train,” said Rich Greenfield, an analyst with BTIG LLC in New York. “As Aereo continues to win legal battles, it’s becoming more apparent it could survive these challenges.”
Retransmission fees in the U.S. are expected to double to $6.1 billion in 2018 from $3.01 billion this year, according to research firm SNL Kagan.
The fees are essential to the broadcast TV industry, Fox President and Chief Operating Officer Chase Carey said in April. If Aereo is permitted to stay in business, Fox’s broadcast network will convert into a cable channel and cease to provide over-the-air access, he said at the time.
CBS CEO Leslie Moonves said he would do the same, as did Univision Chairman Haim Saban.
If the networks converted to cable only, there would be no need for them to have affiliates. Which basically means that every local affiliate in the country would see the value of their station tumble. Station's would be stuck without network programming to fill up much of their time slots.
This could be the tsunami that wipes out TV as we know it Today.