DirecTV is ready to provide national feeds of broadcast networks if and when it is allowed to do so, a move that could help it offset the loss of local channels during carriage disputes, a top executive at the company told StreamTV Insider last week.
The comment was made during a wide-ranging interview with DirecTV's Chief Programming Executive Rob Thun, who expressed frustration over the pay TV company's latest disruption triggered by a retrans dispute with broadcaster Tegna.
Last month, DirecTV was forced to pull more than 60 local ABC, CBS, Fox and NBC affiliates owned by Tegna after a distribution agreement expired with no new deal in place. The blackout also impacted customers of DirecTV Stream, DirecTV via Internet and U-Verse.
As is typical in disputes like these, Tegna says it is seeking a "fair, market-based agreement" for its channels, while DirecTV has accused the broadcaster of demanding a "double-digit" price increase that, if it accepted, would lead to higher bills for customers. Instead, DirecTV offered a unique proposal: Tegna could charge whatever it wanted for its local stations, as long as DirecTV had the ability to move those channels into an à la carte package.
In a statement, TEGNA said the offer was a no-go, calling it "not productive" and saying it "disserves" DirecTV's subscribers because it would force them to pay separately for stations, rather than receiving them in a base package of channels.
As far as Thun goes, rejecting the proposal is just another reason why, in the era of cord-cutting, Tegna is part of the problem instead of trying to help find solutions. And, at some point in the future, Thun thinks there may come a time when Tegna isn't part of the equation at all.
In an interview on Friday, Thun acknowledged Tegna and other independent broadcasters have faced higher costs on their own as they work to reach new affiliation agreements with the Big Four networks. But Thun said distributors like DirecTV shouldn't be on the hook for Tegna's failure to push back against demands from the networks for more money, and restated his belief that Tegna's demand for higher fees were unrealistic.
"The value chain is this: The network, the station, us and the subscriber — and the stations don't push back in [affiliate fee] negotiations enough to modify the prices that are more acceptable," Thun said. "So, they mark up the prices of their [carriage fees], and it's gotten out of hand."
When asked if there could eventually come a time when broadcast station owners like Tegna aren't part of the equation at all, Thun said broadcasters were "adding inefficiencies to the model that is already wobbly based on price."
"We don't need the stations to deliver the network content — we can go get it from the network," Thun affirmed. "So, why don't we work on that construct? And, by the way, we've had those conversations with the networks."
It wasn't clear which broadcast networks DirecTV had approached with the idea. Reached by e-mail on Monday, a spokesperson for Fox Corporation declined to comment. Messages sent to officials at ABC, CBS and NBC went unreturned, and a spokesperson for Tegna declined to make an executive available to speak following Thun's interview.
DirecTV justified its position by releasing a slide deck last week that included Comscore data for some Tegna broadcast stations. The data showed around 70% of the time, viewers who are watching Tegna-owned stations in major markets are tuned in to network programming, compared to 20% who watch local news and 10% who view syndicated shows.
While the data seems to back DirecTV’s desire to replace local TV stations with network feeds, existing federal regulations prevent them from doing so. At the moment, DirecTV and rival Dish Network are only allowed to offer in-market broadcast affiliates to subscribers if they live in an area where such stations are available, with few exceptions. Those network non-duplication and market exclusivity rules also apply to cable companies.
The rules were designed to help local TV stations compete and maximize their returns on programming acquisition costs at a time when cable and satellite companies were importing so-called broadcast "superstations" to offer more syndicated and sports programming. But, over time, local broadcasters have relied upon those market exclusivity rules to demand higher fees for their programming. Cable and satellite companies who reject demands for increased carriage fees have just one option: Pull the channels until an agreement is in place.
Those rules don’t apply to streaming cable replacements, which have substituted national network feeds for local stations in the past. Earlier this year, Fubo replaced most local CBS affiliates with a national feed of CBS programming following a dispute between the CBS affiliate board and CBS parent company Paramount Global. Similarly, Vidgo has offered a national feed of ABC’s network programming in the few markets where it doesn’t have a deal in place to offer a local ABC affiliate.
That could change at some point in the near future: Over the summer, several broadcast companies formed a new trade organization that aims to bring cable-like retransmission consent rules to streaming services. Their effort has been met with opposition from a similar group composed of streaming video and tech companies who argue that applying those rules would lead to frequent blackouts and higher fees for streaming customers, too.
While both sides argue over streaming TV’s future, regulators are trying to solve problems on legacy platforms: In October, FCC Chairwoman Jessica Rosenworcel proposed a new rule that would force pay TV companies to reimburse customers during blackouts. The proposal offers no disincentive for broadcasters whose higher fees trigger the blackouts themselves, though existing regulations already require broadcasters and pay TV companies to engage in "good faith" negotiations toward new carriage agreements.