Local Stations' Cable/Satellite Subscription Fees

[Kelly A]

That is something that needs to change. I pay x amount of dollars for DirecTV. I know how much I pay for ESPN and the other non-OTA networks. I think I have the right to know how much I pay for the rights to Meredith, Arizona State University, Fox, Tegna, Scripps, Univision, NBC/Telemundo, Ion, and Nexstar for the locals. And I should have the right to turn them off and use my antenna, but DirecTV no longer allows that AFAIK.

It's more work and upfront cost, but most modern TV's have built in ATSC tuners that are capable of receiving local DTV signals. One has to switch back and forth on TV inputs between a satellite tuner and the internal tuner, but I imagine one can have the local station "spot casting" shut down on your DirecTV receivers to save the $5.00 a month, or whatever that charge is.

At home I have both options. My antenna and distribution system allows me to switch to OTA during a severe rain-out. Theoretically, if you can receive local TV signals without using the DirecTV box, you shouldn't be charged for it.

 

[KeithE4]

It's more work and upfront cost, but most modern TV's have built in ATSC tuners that are capable of receiving local DTV signals. One has to switch back and forth on TV inputs between a satellite tuner and the internal tuner, but I imagine one can have the local station "spot casting" shut down on your DirecTV receivers to save the $5.00 a month, or whatever that charge is.

My point is that I have to pay that money to the stations even though I have an antenna. No way are the stations going to allow opting-out of that.

At home I have both options. My antenna and distribution system allows me to switch to OTA during a severe rain-out. Theoretically, if you can receive local TV signals without using the DirecTV box, you shouldn't be charged for it.

Yes, "theoretically." But in the real world, the stations and networks survive on subscription fees, paid by everyone, watching or not, like the cable networks do. The advertiser-only, viewers watch free business model hasn't worked in years. That era is gone and is never coming back.

 

[Kelly A]

I could be wrong, but I don't believe the rules have changed for watching local TV via cable or satellite. That is; cable and satellite companies aren't supposed to charge extra subscribers for watching local TV. Any charges are supposed to be to cover technical costs of converter boxes to receive local stations, etc. Cable companies are required to offer a 'basic cable' which includes local TV. Now, are they required to publish that tier? No, but you can ask for it:

From the FCC:
" Cable operators may require their subscribers to use specific equipment, such as converters, to receive the basic service tier. They may include a separate charge on your bill to lease this equipment to you on a monthly basis. This monthly rate must be based on the operator's actual costs of providing the equipment to you. Operators may also sell equipment to you, with or without a service contract. If an operator provides a choice between selling
and leasing the equipment, the monthly leasing rate will be regulated but the sales price will be unregulated. If an operator only sells equipment and does not also lease equipment, then the sales price must be the actual cost of the equipment plus a reasonable profit, and any service contract should be based on the estimated cost to service the equipment. If the customer buys the equipment but does not purchase a service contract, the customer can be
charged for repairs and maintenance. Cable operators may not prevent customers from using their own equipment if such equipment is technically compatible with the cable system."

 

[KeithE4]

I wonder what percentage of revenue the individual stations receive from carriage fees (received from 75-90% of viewers, depending on the market) compared to ad dollars (rates based on 100% of viewers, OTA, cable, or satellite). I'm talking about local stations, not ESPN, CNN, TNT, etc.

And how much of that revenue do the networks take as their cut?

 

[Kelly A]

I wonder what percentage of revenue the individual stations receive from carriage fees (received from 75-90% of viewers, depending on the market) compared to ad dollars (rates based on 100% of viewers, OTA, cable, or satellite). I'm talking about local stations, not ESPN, CNN, TNT, etc.

If you're talking about local TV stations, depends on the market size and whether the station is a big four network affiliate. As an example; stations in markets 100+, may only see an average of .15 per sub, where a larger market could see 1.50. A CW affiliate in the same market may see much less, if any.

 

[KeithE4]

If you're talking about local TV stations, depends on the market size and whether the station is a big four network affiliate. As an example; stations in markets 100+, may only see an average of .15 per sub, where a larger market could see 1.50. A CW affiliate in the same market may see much less, if any.

Let's say, for example, a network O&O in Chicago (roughly 3 million households, 2.5M with cable/satellite) gets $1.00 per subscriber per month on average from Comcast, DirecTV, and Dish. That's $2.5M * 12, or $30M per year before selling one dime of advertising. Its network gets its cut, I assume (I don't know whether or not the financial relationship between the O&Os and their network bosses is the same as with affiliates), and even if it's 33%, that's $20M per year.

Do they sell that much time? More? Less? Would losing that $20M be a significant chunk of their revenue? My numbers may not be exact, but I hope everybody sees the point I'm trying to make, regardless of whether it's NYC, Chicago, or Glendive.

 

[Kelly A]

Do they sell that much time? More? Less? Would losing that $20M be a significant chunk of their revenue? My numbers may not be exact, but I hope everybody sees the point I'm trying to make, regardless of whether it's NYC, Chicago, or Glendive.

I'm not sure the point you're getting at. Is it that $20M a year is a lot of money? Would losing that sort of revenue hurt? You bet! In a market like Chicago (your example), that's potentially one third of the annual station revenue, with local and national sales making up the remaining two thirds. That said; operating a network affiliated TV station in Chicago isn't cheap either. It isn't like radio, not even close. Expenses of a large market station mean that $20M get's gobbled up in a hurry.

Not that I'm an apologist for the cable companies either, but their margins aren't very good because of things like sub fees to every channel they carry. Last I saw, cable margins run about 5-8%. Usually successful businesses consider good margins to be in the 45-55% range.

 

[CTListener]

I'm not sure the point you're getting at. Is it that $20M a year is a lot of money? Would losing that sort of revenue hurt? You bet! In a market like Chicago (your example), that's potentially one third of the annual station revenue, with local and national sales making up the remaining two thirds. That said; operating a network affiliated TV station in Chicago isn't cheap either. It isn't like radio, not even close. Expenses of a large market station mean that $20M get's gobbled up in a hurry.

Not that I'm an apologist for the cable companies either, but their margins aren't very good because of things like sub fees to every channel they carry. Last I saw, cable margins run about 5-8%. Usually successful businesses consider good margins to be in the 45-55% range.

Wow, that's in the state lottery range on the Greed-O-Meter! (Scratch tickets, BTW, are the worst. Not only does only 45-55 percent of money taken in go back to the winners, but thousands of prizes are never won because the games end when the final top prize is claimed.) I've always heard 25-30 percent mentioned as acceptable where I've worked, but then I've never worked for a major, publicly traded corporation.

 

[Kelly A]

Wow, that's in the state lottery range on the Greed-O-Meter! (Scratch tickets, BTW, are the worst. Not only does only 45-55 percent of money taken in go back to the winners, but thousands of prizes are never won because the games end when the final top prize is claimed.) I've always heard 25-30 percent mentioned as acceptable where I've worked, but then I've never worked for a major, publicly traded corporation.

Greed? By your definition if a business loses money or only breaks even, then they aren't considered greedy?

 

[CTListener]

Greed? By your definition if a business loses money or only breaks even, then they aren't considered greedy?

Did you read my post in full? How does a company with a 25-30 percent profit margin break even or lose money?

 

[newsmark]

Because the FCC allows it and the stations demand it. And the networks demand their cut from the stations.

Keith, I think the point I was making here got lost. I was suggesting that it's odd that subscribers pay for any commercial channel--OTA *or* cable channels.

I think we all recognize most channels for what they are: commercial delivery systems. But why should we pay for the privilege of watching commercials? (Other than the basic fee to get the signal to our houses.)

 

[Kelly A]

Did you read my post in full? How does a company with a 25-30 percent profit margin break even or lose money?

Yes, I did read your post completely. What was confusing is how you tied a lottery in with business margins. That didn't make much sense. So, what is your threshold of greed then? Is greed only when millions of dollars are in play, or a business that has 50% operating margins but working with hundreds of dollars annually? Are they also considered greedy by your standards?

 

[Kelly A]

If you're still interested in the revenue split for things like retrans and alike, here is an example in Scripps latest publication from Scripps Q4 results: http://www.tvnewscheck.com/article/...For+Scripps,+Media+General,+Gray,+Entravision

Understand that this is a station group, not an individual station, but you get an idea of what a typical group-wide split of retrans vs. national, local, and political advertising.