Free broadcast TV stations used to make their money off ad revenue, but increasingly the big networks are now relying on licensing fees to do business. These retransmission fees come from the pay-TV operators in exchange for the right to carry network content on their channel line-ups. Comcast pays ABC, and voila, ABC shows up on Xfinity TV.
As an example of just how lucrative the licensing business has become, CBS (full disclosure – CBS owns SmartPlanet) almost doubled the amount it made from retransmission fees over the last year, bringing in a total of $60 million according to one financial analyst.
The advent of IP video, however, is complicating the issue of retransmission rights. In theory, if TV networks are free over the air, one might argue that they should be free online too. But the networks don’t want to continue investing more money in online delivery without getting some return. Hence the reason Fox decided to pull its free TV episodes off the web last year, and more recently the broadcaster-owned venture Hulu announced it would start a shift toward making viewers sign in for service with proof that they already have a paid cable, telecom or satellite video subscription.
To make things even more complicated, it’s unclear whether video aggregators have the right to distribute free over-the-air TV on the Internet if they take on the cost of video encoding and delivery. A new start-up called Aereo is trying to do just that with its own array of TV antennas and has run up against a wall of opposition from the broadcast networks. In several court filings this week, broadcasters sought a preliminary injunction against the start-up using the argument that pay-TV providers could follow Aereo’s IP delivery model and thus get around established retransmission agreements. That would be a financial disaster for the networks.
The stakes in this debate are high, but as great as they are, the legal battles are actually masking an even larger issue. If all TV eventually gets delivered over IP, will the broadcast networks remain free? And with all the other information and entertainment available on the Internet – including news – should they remain free?
The free TV debate is one nobody is quite willing to have yet, but it certainly has to be on the horizon for discussion. Technology is radically changing the television landscape. That means we have to start re-examining our ideas about what we expect from TV as a society, and what we’re willing to pay for.
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