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Aug. 14, 2014, 3:33 p.m.
Business Models
LINK:  ➚   |   Posted by: Joshua Benton   |   August 14, 2014

At Poynter, Al Tompkins notes an interesting development in the TV world:

CBS fired an opening salvo in what could become a disruption for network affiliated television stations.

WISH TV, the LIN Broadcasting owned station in Indianapolis will no longer be the CBS affiliate starting January 1, 2015. CBS is moving from LIN owned WISH-TV to the Tribune owned station WTTV, currently the CW affiliate. Tribune also owns the FOX station in Indy.

The move will cost WISH about half of its revenue, according to one media analyst, who added it will serve as a warning to other network affiliated stations. CBS is sending a signal that it is prepared to play rough when it comes to the percentage of revenue that local stations pass along from the retransmission fees that cable companies pay the local stations. In TV terms, the money that an affiliate pays a network is “network compensation” often called “net-comp.” Side note: A couple of decades ago, networks sent compensation to local stations and it is now the other way around.

This is worth watching because of a few simple facts:

— Despite the fact that discussions about the future of news are dominated by digital people and newspaper people, local TV news is still the No. 1 source of news for Americans.

— Even though the Aereo decision at the Supreme Court came down in favor of the broadcasters, the threat of Aereo made it obvious that the traditional relationship between local stations and national networks is not carved on stone tablets. Just as NPR is slowly building a brand and products that have less need for local stations, it’s not difficult to imagine a future where you watch “CBS” or “NBC” rather than your local CBS or NBC affiliate. The delocalization of media continues apace.

— If networks keep trying to soak local stations, it likely only speeds up a more fundamental reshaping of their relationship.

SNL Kagan, a leading media research firm, says within three to five years local stations may be handing over 50-to-60 percent of their cable retransmission income to the networks. The cost of resisting could be high.

And local news has become an increasingly important part of station revenue.

Local TV news isn’t as sexy as digital startups, and its decline hasn’t been as dramatic (or important journalistically) as newspapers’. But there are real changes coming that could have a real impact on how informed people are about their communities.

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