Why retransmission fees kill your favorite channels

DirecTVAmericans love their TV.  They may not admit it, but according to the 2014 Nielsen Cross Platform Report, the average American adult watches more than five hours of live television every day. So even with all the hype surrounding DVRs, and watching shows online — people still sit in front of a TV set.

I know first hand how people love their TV and how unhappy they get when they lose access to it.

At the time of this post, DirectTV is not able to re-transmit several stations including WTHR-TV in Indianapolis, WBNS-TV in Columbus, which are owned by Dispatch Broadcasting, and more than 50 stations across the country owned by Raycom Media.  It’s all over because of a retransmission fee dispute.

What is Retransmission Consent?

In 1992, the United States Cable Television Consumer Protection and Competition Act required cable operators and multichannel video programming distributors (MVPDs) to obtain permission from broadcasters before they can carry their programming.

Broadcasters could give cable companies one of two options: Pay for the right to carry their station and programming or require them to carry the channel — also known as “must-carry”.

There are benefits for stations to choose one option or another and depend on the size of the station and the quality of their programming. A small independent station may elect for must-carry coverage otherwise the cable company may determine their channel is not valuable enough to be included on their system.

Pay Cable Channels

I’m not talking about HBO or Showtime. Those are subscription channels. However, almost every network that is part of your cable lineup charges the cable company for your ability to view that channel.

For example, according  the website What You Pay for Sports, ESPN charges cable companies $5.75/per subscriber to get ESPN. (That’s just ESPN, add on another dollar to receive all the other ESPN network fees.  Those channel fees are less, but they don’t air NFL games.)

In the Midwest, you pay $1 for access to the Big Ten Network, while subscribers in Arizona pay much less.

For non-sports channels, you pay anywhere from just a few pennies up to over a $1 for channels like Disney and TNT according to The Wrap.

In my house we mostly likely will never watch Lifetime or Bravo, but we still pay for it every month. If you not a fan of sports, they you should really not be a happy about your cable bill.

Cable networks still have commercials in addition to their carriage fees, in essence two sources of revenue. That dual stream of income allows them to develop and pay for programming — even if nobody watches them.

Broadcast Stations left out

These cable networks cashed in by delivering new original programming that attracted new viewers, and took away a percentage of the audience from traditional networks. It also cut into what traditional broadcast networks could charge advertisers for commercials. This made it harder to invest in programming.

As local advertising revenue started to drop, broadcast stations adapted the cable networks model of pay for carriage via retransmission consent. Cable systems and other MVPDs have balked at paying the higher fees for over-the-air free television. Early on these fees were minimal, but have significantly increased over the years.

Multimedia reported in 2008 that local broadcasters were asking anywhere between $0.40 and $1.10 per subscriber per month in retransmission fees. Broadcasting and Cable also reported in 2008 that fees ranged between $1.00 and $1.65.

So how do they determine these rates?  It all goes back to what you watch. Even with all the segmentation in our 200+ channel universe broadcast networks: ABC, CBS, FOX and NBC still attract the biggest share of the audience. CBS airs more NFL games than ESPN, but you pay less for it.

According to Nielsen, the Top 10 List for most viewed programs in the country almost all were on broadcast TV, during the week of August 18, 2014. Only two programs: 2014 Video Music Awards on MTV and a NFL Pre-Season football game made the list.

The infamous blackouts

In many cases, local broadcast companies and satellite companies negotiate new re-transmission deals and never make headlines. However when a deal over retransmission fees is not reached by the end of the contract, the cable or satellite company has no legal authority to re-transmit the local station’s signal.

Both the TV stations and the satellite providers turn on their propaganda machines on why the other party is at fault.

In the current example, DirectTV claims that Dispatch is seeking a 400% increase in programming fees! Without knowing the details, one could assume they’re asking for an increase from .25 to $1 per subscriber. Even if they were currently paying .50 cents a sub, that means they’re asking for $2.  The message the broadcasters tell their viewers is they’re asking for a lot less then the other channels your cable company offers.

Networks want their money

The networks pay millions to develop programming and billions to license rights to carry sports like the NFL and NCAA. They now are demanding that local stations pay networks for the right to carry their affiliation. CBS is switching their affiliation from WISH-TV here in Indy to WTTV-TV in 2015 because the owners of WTTV were willing to pay CBS for that programming. Now all broadcast companies are on notice that the networks want a piece of those retransmission fees collected.

(More on that in my previous post.)

What is it worth to you?

In the end, as a consumer it’s up to you to lay blame. In many cases, you are already paying a “Broadcast TV Fee” surcharge in your monthly bill to support these retransmission fees. It’s a hidden cost, but it’s there.

Is network programming, local news and public service information important to you? Are you willing to pay a little extra each month for a cable or satellite company to deliver that programming to you with 200+ other channels? Then tell your cable or satellite provider to suck it up and reach a deal.

If you believe free over-the-air TV should be free and cable companies shouldn’t have to pay for it, then expect the quality of those stations to decline as they continue to lose audience share and the advertiser revenue with it.  You can also expect big events like the Super Bowl, NCAA Tourney, The Olympics and other programming to be all on cable. They’ll be the only ones who can afford those license fees.

In the end, this is all boils down to who is going to get the biggest chunk of your monthly cable bill. It just sucks you’re in caught in the middle and there is little you can do.

Breaking down the CBS Indianapolis affiliation switch

CBSIndianapolis affiliation switches dropped a tactical nuke on WISH-TV Channel 8 today when Tribune Media announced and affiliation switch that bring CBS programming to WTTV-TV Channel 4 on January 1, 2015.

It’s not the first time network affiliations have swapped channels – it’s happened in Indianapolis before, but this time the collateral damage could be quite large.

There are a lot of questions and possible legal challenges that could be coming in the next few weeks – if the two station owners want to play hardball.

Who are the Players?

LIN Media owns WISH-TV.  LIN is currently awaiting approval to merge with Media General, another broadcasting company. LIN also owns WNDY-TV 23 which is known on air as MyINDY-TV.   Both stations operate out of the same facility and share resources.

Tribune Media owns WTTV-TV and WXIN-TV 59, Indianapolis’ Fox affiliate.

WISH-TV has been a CBS affiliate since 1956.  WTTV-TV has been an affiliate of CW and the now defunct WB network since the 1990s. WTTV had been an independent station since the late 1950s.

All About Money

According to Variety, LIN Media was in contact talks to renew affiliation deals with CBS. The article states that LIN was balking at CBS’ reverse-compensation terms.

What is reverse-compensation you ask? In order to answer that question, you have to dig deeper into how TV stations make their money. Traditional commercial ad sales are only a portion of the station’s revenue stream.  For the last several years, an increasing portion of the station’s revenue stream has been from cable retransmission contracts.

Cable and satellite companies have to seek permission from broadcast TV stations to air their channels on their cable systems. This permission is also called retransmission consent. TV stations can demand compensation from the cable/satellite company to carry their signal.

When the two parties can’t agree they broadcast station is forced off the cable system until a deal is reached.  When this happens the losers are always the viewers.

Indianapolis has seen several broadcast channels go off cable/satellite providers in recent years.  Some of the more impactful ones included were WISH-TV and Bright House, who had a month long dispute in 2008.  WISH also went off DISH in 2011, while WTHR went off Bright House and WXIN/WTTV went off DirecTV in 2012.

Cable systems and broadcaster do not reveal the exact terms of retransmission deals, but reports have been anywhere from $0.50 to $1 per subscriber/month. According to Nielsen estimates, there are 1.1 million TV households in Indianapolis DMA. TVB.org estimates that almost 90% of households subscribe to cable TV or satellite service which would equal about 990,000 households.

That means they typical retransmission deal could be worth anywhere from $5-10 million a year in additional revenue for an Indianapolis TV station.

For comparison, ESPN gets $5.54 according to a 2013 article from TVNewsCheck.com.

Broadcast networks like CBS now want a piece of that retransmission money also known as reverse compensation.  CBS argues that it’s their highly rated prime-time programs that generate the most ratings for the station.  (It’s called “reverse compensation” since networks used to pay local affiliates to carry their programming in the days before cable.)

In the end, Tribune was willing to pony up the cash for the right to carry CBS programming on WTTV. CBS also is sending a message to affiliates across the country if you don’t pay – we’ll find someone who will.

What’s this mean for WISH-TV?

Initially, this looks to be about the worst case scenario for WISH-TV.  Losing CBS prime time programming, the Indianapolis Colts and other sports programming. That is a significant chunk of the station’s revenue stream.

Affiliation switches usually mean affiliations will just switch stations. This is what happened to WTHR and WRTV in 1979 when the stations swapped the NBC and ABC affiliations.

In this case, Tribune is going to keep their CW affiliation and move it to a digital sub-channel.  That leaves little options unless they can get another network to break their affiliation deal.

Tribune and FOX signed their most-recent affiliation agreement in 2012.  WXIN has done a great job building their news brand in Indianapolis, and there’s not much in it for FOX to switch.

ABC is not going to be an option for LIN as WRTV-TV’s owners E.W. Scripps has a great relationship with ABC, and their current deal goes through the end of 2015.  Scripps has also put a lot of money and new resources into WRTV since they purchased the station a few years ago.

That only leaves NBC as the wildcard. WTHR is by far the market leader in local news programming ratings and is one of NBC’s strongest affiliates.I couldn’t find any information on WTHR’s current affiliation deal with NBC — one would expect it is locked up for a few more years. However, WTHR is a small family owned station and does not have the same bully power as LIN/Media General corporate giant would wield in group affiliation deals.

If LIN Media can’t lure NBC away from WTHR, then they will have to forge ahead as an independent station. I would expect them to add more newscasts and fill in the rest with syndicated programming or paid programming.

WISH’s challenge will be to find quality programming to fill their daytime and primetime schedules.  Most of the syndicated programming (the good shows) are already locked up – mainly by WXIN and WTTV.

If WISH goes the independent route, look for them to cut costs where they can. However, they run a pretty tight operation, and you can’t cut staff if you’re expanding news coverage.  You may see some tenured talent replaced for younger (read cheaper) talent.  Will they be able to continue to afford a news helicopter?  All these questions and many more will have to be answered in the coming months.

¡Hola! Indy?

There are few wildcard options out there.  LIN could move MyNetwork and WNDY-TV programming to WISH and make MyINDY-TV 23 an affiliate of Telemundo or Univision and bring Spanish television to a full-power broadcast station.  (LIN owns WIIH-CD, a low power station which was a Univision affiliate from 2003-2008). According to the U.S. Census Bureau the Hispanic population is 6.4% in Indiana so it would focus on a tiny but growing audience.

LIN could also work with a digital sub-channel network like Antenna TV on WNDY as well. WNDY could also be relegated to a station that airs paid programming 20 hours a day.

Viewer’s headaches just beginning?

For viewers who just want to watch their favorite programs there still will be a lot of issues ahead.  Expect retransmission battles with cable and satellite providers to erupt as Tribune looks to get more money for WTTV.

Cable companies will be going to LIN demanding lower re-transmission fees for WISH – hurting their soon to be crippled revenue streams.

Viewers in Lafayette, Terre Haute and Ft. Wayne television markets might see WTTV disappear from their cable systems since LIN still owns the CBS stations in those markets.  WLFI, WTHI and WANE-TV can force their exclusivity rights in those markets and block network programming on WTTV.

Personal Thoughts

I spent five years as Digital Director at WISH-TV.  The hardest thing about leaving was the people.  There are some really talented people who work at what employees call the “1950 Building”, both in front and behind the camera.  Sources I talked with inside WISH and other Indianapolis TV stations all have the same shell shocked feelings. It’s going to take a few days for this all to sink in.

LIN or Media General will survive.  Yea their stock price may take a hit, but WISH/WNDY is just a small portion of their portfolio. WISH was once LIN’s flagship station – after the merger it will be the fourth largest behind San Francisco, Tampa and Portland.

It looks like LIN Media executives were caught off guard as well. Hours after Tribune’s announcement there has been very little word from LIN execs — even in industry trade publications.  I’m sure there is some serious damage control underway in the corporate boardroom.  Sources told me that WISH management found out the news just minutes before Tribune’s press release hit the street.

I just worry about all the people who now face an uncertain future.

Keeping WordPress site secure from hackers

Editor’s Note: This article first appeared in the monthly newsletter for Solutions Unlimited, a technical support/IT services company based in New Castle, Ind.  This article is an expanded version of that original article.

WordPressRecently an IT company blogger published an article with the attention grabbing headline: “Warning: If You Are Using WordPress For Your Company Website, There Is A 73% Chance Your Site Is Vulnerable To Be Hacked.”  The article references research study completed by EnableSecurity.

For those who don’t keep their sites WordPress sites secure by doing regular maintenance, there is a reason to be worried.

WordPress is the most popular blogging and content management systems in the world. In fact, one out of every five websites run WordPress. Because of its popularity, it is a prime target for hackers looking to cause trouble. But there’s no need to worry. Crundwell Digital develops websites for our clients exclusively in WordPress, and we have 100% confidence in its stability and security.

How to keep your WordPress site secure

There are some easy steps WordPress administrators can take to keep their WordPress site secure.

  1. Keep your WordPress core up-to-date. The current version is 3.9.1. (as of 8/4/2014). If you are not running one of these versions, you should update. (Check here for the latest version.)
  2. Make sure your plugins and themes are also up-to-date. Out-of-date plugins can be vulnerable to hackers.  Also check the support status of your plugins and themes. I’ve seen many sites break because they original developer is no longer supporting a theme or plugin.
  3. Use difficult to guess passwords. Include upper and lower case characters, symbols and numbers. Use a strong password generator like this tool.  Also, do not setup a WordPress site with the default account of “admin”.
  4. Install a security plugin. We use WordFence on all of our websites. It scans the WordPress code for any changes to core files, and it also monitors for potential attacks and blocks unauthorized access. The free version will suffice for most installations. The premium version provides additional support like country blocking.
  5. Be wary of cheap hosting plans. Some of the big names offer annual hosting plans for just a few dollars a month. These are easy targets for hackers because so many WordPress sites are running on the same server, and updates may not be happening. An attack on another site in your shared hosting environment could take your site down as well.
  6. Purchase an SSL security certificate and force HTTPS encrypted browsing, especially if you collect data or conduct eCommerce.
  7. Make frequent backups of your website. I recommend the premium version of UpdraftPlus. This WordPress plugin schedules backups of your website and uploads them to cloud storage service like Dropbox.

Take the time to ask your website manager what they’re doing to make your WordPress site secure. If you built your website more than a year ago and you aren’t paying someone to maintain it – you’re probably at risk.

In today’s digital first business environment, you can’t risk your customers’ trust by having them visit a website that’s been compromised.

If you have questions about WordPress security or would like to learn more about Crundwell Digital Marketing’s products and services — email us.

Crundwell Digital Marketing celebrates one year

Growing up, I hated roller coasters. I don’t think I rode anything other than the Jr. Gemini at Cedar Point until I was in junior high. My classmates forced me on the Magnum XL 2000.  Well, I was hooked.

In many ways that’s how this last year has been. Once crazy roller coaster ride.
cdm_logoIt was one year ago today, January 14, 2013 when I registered my company’s domain name CrundwellDigital.com. I guess in the digital world, a domain name registration is as close to a birthday as you can get. With that purchase followed by a logo and business cards, Crundwell Digital Marketing was born.

A year later, we’ve provided to clients small business web design in Indianapolis, Ohio and New York. We now have over 30 sites in our portfolio with more to come.

Read more

Gift Ideas from Crundwell Digital

Are you looking for a last minute Christmas gift?  Crundwell Digital Marketing works with several clients who have some really cool gift ideas.  Is this a shameless promotion for my clients — yes.  It’s my blog I think I have a right to do that.

Garb2Art

LipGarb, NailGarbIlovelipgarb.com – Ladies, this is a client that you will love!  CDM is working an eCommerce upgrade of LipGarb, a line of makeup that has a lot of sparkle.

It’s a Indiana based start-up who is growing fast!

 

Crownlinks Coffee

Crownlinks CoffeeCrownlinks Coffee — A great coffee and an even greater cause.  Crownlinks Coffee purchases their coffee from small coffee growers in third world countries.  It’s roasted fresh when you order it and mailed directly to your home.   With Crownlinks Coffee you’re also helping a great cause.  All the profits from Crownlinks go directly to help a Christian Mission radio station and other groups based in Haiti.

Allen Family Fudge

Allen Family FudgeBy far, the sweetest client I work with. Allen Family Fudge is some of the best fudge on earth!  They use only the best ingredients and make pure fudge — no fillers so it’s also gluten free.

Allen Family Fudge has over 21 varieties of nutty and nice fudge.  Let’s just say I’ve sampled a few and it’s great!