(Bloomberg) -- Federal Communications Commission member Brendan Carr fired a broadside at Walt Disney Co. Chief Executive Officer Bob Iger this month, urging him to reach more economical contract terms with local TV stations affiliated with the company’s ABC network.
Carr, who has been nominated to be chairman of the FCC by President-elect Donald Trump, accused ABC of trying to “siphon more and more money away from local broadcast TV stations” even as Disney shifts marquee programming to its streaming services. The loss of revenue may hurt local news coverage at a time when Americans’ trust of the media is at a low, Carr wrote in a Dec. 21 letter.
“I want you to know that I will be monitoring the outcome of your ongoing discussions with local broadcast TV stations to ensure that those negotiations enable local broadcast TV stations to meet their federal obligations to serve the needs of their local communities,” Carr wrote.
Disney didn’t respond to a request for comment.
So-called retransmission fees, which companies like Charter Communications Inc. and DirecTV pay to station owners, have been a huge source of profit for the TV industry. The fees have tripled over the past 10 years, and broadcasters like Nexstar Media Group Inc. and Sinclair Inc., two of the largest station owners, get more money today from those payments than they do from advertising.
But the revenue flowing to local stations is expected to decline to $7.2 billion in 2025 from $7.4 billion in 2023, according to estimates from S&P Global and Bloomberg Intelligence. With pay-TV audiences shrinking, the total paid by cable operators is growing only slightly, and S&P projects the share of retransmission fees flowing to networks like ABC and NBC will rise to around 52%, up from the historical 50-50 split.
While Carr’s letter focused on ABC, all of the broadcast networks are seeking higher fees from their local affiliates, according to Hank Price, a former station manager and now columnist for TVNewsCheck, an industry publication.
“The anger out there is extreme,” said Price, who talks to local TV executives.
In some cases, the networks have negotiated a flat fee for programming that is greater than what the local stations collect from distributors, Price said. Flat fees are particularly onerous because they don’t drop when customers cancel their cable service and the revenue that stations collect from cable providers shrinks.
CBS, part of Paramount Global, and Fox Corp.’s Fox network have been the most aggressive in seeking higher fees, according to Price. Fox, which doesn’t have a general interest streaming service like the other media giants, has told local station owners they should pay more because the network’s programming, including college and pro football games, is exclusive to its stations.
The networks have also sought to shorten the length of their contracts with local stations, which typically run from two to five years, according to one industry official who asked to not be identified discussing private terms.
The rising cost of sports rights is often cited as the driver of higher fees. And yet more sports programming is migrating to streaming services such as the CBS-affiliated Paramount+, Disney’s ESPN+ and NBC’s Peacock, encouraging customers to cancel cable.
“The networks are trying to find their future business model and we’re trying do the same,” said Catherine Badalamente, chief executive officer of Graham Media Group, which owns seven local stations.
On Dec. 30, Gray Media Inc., another large station owner, announced that it reached a new agreement with ABC. Kevin Latek, Gray’s chief legal and development officer, said his company hadn’t been in contact with Carr about its negotiations, but is happy with the terms it got.
“We’re very pleased to renew with ABC for four more years,” he said. “They’re good partners.”
©2024 Bloomberg L.P.