Is Local TV Worth Saving? Part 1

Part 1 of 2

If you were assigned to design television from scratch probably the last thing you’d do was include a series of local broadcast television stations whose primary delivery mechanism was a mid-20th century technology called “over the air.” You certainly wouldn’t make each one independent and limit the number of stations that could be owned by any given network.

That, however, is the system we have now, a leftover vestige of midcentury America that seemingly has no place in today’s world.

A potent combination of politics and local pride make it unlikely that local broadcast television will go away anytime soon, but it’s worth examining how this curious beast came to be before we look at its future potential.

The Birth of Local TV

Local television stations existed before television networks. They cropped up in the 1940s and early 1950s as televisions capable of receiving VHF (very high frequency) signals became more popular. Much of that very early content was produced by the stations themselves, a tradition that continues to this day, with local news broadcasts.

As TV networks came into being in the early 1950s, they bought up the local broadcasters in major markets in the Northeast, Midwest and California. But in order to maintain media independence and to prevent large companies from dominating the media landscape (and to protect some of the larger station owners) the FCC instituted a rule stating that a stations owned by a single group could not collectively reach more than 39 percent of all U.S. TV households.

While this rule limited "O&Os"--network owned and operated stations to a handful of major markets, it did not prevent the networks from striking affiliate deals with local stations or station groups, which meant that while the stations retained their independence, they agreed to run the network’s programming and national advertising during certain periods, notably prime time, which lasted from 8pm to 11pm on the East and West coasts and 7pm to 10pm in the middle of the country.  In addition to the fees they received for carrying the network’s programming, local broadcasters were entitled to around two minutes each hour for local advertising, which, on a popular show like Bonanza or Bewitched, could be quite lucrative.

The advent of cable in the late 1970s changed the equation quite a bit. While, in an echo of today's doom and gloom headlines, contemporary media of that era kept predicting the imminent death of broadcast television thanks to cable, no such thing happened, and the broadcast networks continued to thrive.

Retrans and Carriage Fees

The biggest change of the cable era was that people stopped watching television over the air. Reception in the U.S. had always been spotty, and even with rooftop antennas and indoor rabbit ears, not every station came in clearly. Cable changed all that, and by 1990, around 80% of the U.S. population had some type of cable TV subscription.

The cable companies paid the various networks for the rights to show their programming. This is what is known as a "carriage fee" for cable networks and a “retrans” or retransmission fee for broadcast networks. Which means that Comcast is essentially paying ABC, and all of ABC’s affiliate stations for the right to retransmit the broadcast signal via cable.

The cable companies  negotiate with each affiliate station or station group separately and since, especially in the early days, broadcast TV was the main thing anyone watched on TV, the broadcast networks and their affiliates had the upper hand. Still, business was booming, everyone was making money and so the arrangements (more or less) faded into the background, where they remained until the internet came knocking.

The Dawn Of The Digital Age 

Silicon Valley types initially had a limited understanding of how the television industry worked and it’s been said that the one thing that surprised most of them early on was the existence of local broadcasters and their relationship with the broadcast networks.

Tech companies had assumed that they could walk into NBC and negotiate a deal to carry the NBC feed on their new digital TV network and that said deal would work just like the ones they were looking to strike with CNN, Discovery and other cable networks. They were, to put it mildly, quite surprised to learn that there was this pack of dozens of broadcast stations, the affiliates, over whom the NBC executives had only minimal control.

It is an urban legend at this point that when Apple finally got the broadcast networks to sit down talk to them, they were told they needed to go out and get all the affiliates to agree to the deal and when they had that tied up, then, and only then, would the networks sit down and talk. Or, to look at it another way, it was the television industry equivalent of being told they needed to go slay the dragon before they could ask for the hand of the princess.

What struck the Silicon Valley executives was how incredibly inefficient the local broadcast system was. In an age where media was instantly distributed on an international basis, television seemed stuck in an antiquated system based on local control of distribution. What’s more, the original reason these stations had come into being—to broadcast television signals over the air, was no longer a particularly viable technology and was only used by a very small percentage (10% of less) of the station's viewership. It was as if the Valleyites had suddenly stumbled on an island where people still relied on 14.4 dial-up modems. 

Local Broadcasting Today

Local broadcasters seem to be feeling the brunt of the fallout caused by the TV[R]evolution as they struggle to find a raison d’être in the current digitally-focused television ecosystem. While local newscasters remain celebrities in smaller markets, their ratings are sinking as younger viewers turn to the internet for local news, which frequently comes from local newspapers who are now making greater use of video. In fact many younger viewers are surprised to learn that TV can actually be delivered over the air and that their local CBS station is a separate entity from the network it is allegedly a part of.

Advertising is under pressure too, as better targeting options mean that local advertisers can reach targeted local audiences via addressable digital and MVPD cable TV options. 

Large ownership groups like Sinclair are rolling up local broadcasters to the point where the groups are almost the size of an actual network. And the rapid growth of vMVPDs has brought the notion of independence and who gets to decide what viewers can see and record to the fore.

Tomorrow in Part 2, we’ll look at the prospects for Next Gen Broadcast (ATSC 3.0) and for local broadcasters in general, along with our own TV[R]EV predictions on where it will all wind up. Stay tuned.