Tuesday 21st of May 2019

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‘Free’ TV May Begin To Charge Fees

“Free” television is considering changing the channel when it comes to its business model. Since its launch in the 1940s, all the networks and their affiliates have provided their content at no direct charge to the consumer. Those days could be numbered.

Just as the recession has taken its toll on revenue streams of most industries, ABC, CBS, NBC and Fox and the local stations that carry their programs have seen their primary cash source - advertising - curtailed. They now look to cable television and its traditional charging for content as the potentially new way to do business.

“Good programming is expensive,” media mogul Rupert Murdoch told shareholders of News Corp. recently. “It can no longer be supported solely by advertising revenues.” Murdoch is chairman and CEO of News Corp., which owns Fox.

Part of the revenue for the over-the-air networks traditionally had been passed on to the affiliates for broadcasting the network shows. As the local stations have seen their audience shares decline, so have the fees paid by the networks.

By comparison, cable channels get most revenue by charging fees to cable and satellite operators. Those providers in turn pay an average of about 26 cents per subscriber per channel. But the range is wide, with MTV2 charging a few cents and the widely popular ESPN demanding nearly $4.

The Fox network could be taking its first steps in that direction. Time Warner Cable received notice from Fox that as soon as Friday it will be stop the signal to the cable operator unless the network receives higher fees. Time Warner has turned to its customers on whether to fight the battle.

In the works is the nation’s largest pay-TV provider, Comcast, getting ready to take control of NBC. Although there has been no decision to end the network’s free broadcasts, Jeff Zucker, president and CEO of NBC Universal, told its investors “the cable model is just superior to the broadcast model.”

In addition to the fees, the cable channels also make money the old-fashioned way: selling advertising. In 2008, 39 percent of all spending on television advertising went to cable owners. That’s up from the 24 percent share 10 years earlier.

Getting revenue from the fees and advertising has helped the cable channels weather the storm of the recession. By contrast, the over-the-air networks have had to lay off staff and at least two broadcast groups have petitioned for bankruptcy protection.