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Bleak Future Ahead for ‘Free’ TV

3/22/2010 12:58 PM Eastern

The Federal Communications
Commission recently
launched an examination of
the future of media and the
information needs of communities
in a digital age. Some
sobering trends over the past
decade should influence the
agency’s ultimate findings
and affect how we receive and
value local broadcast information
in our communities in the
future.

Let’s examine the facts. As
early as 1990, Michael Wirth
noted in the Journal of Media
Economics that the cable industry
was having an increasingly
negative impact on broadcast
television, as its power in both
the programming and advertising
markets increased. Ten
years later, his findings were
confirmed. The last time overthe-
air television broadcasting
was watched by a majority
of households was in 2000. This
dramatic downward trend not
only continued over this past
decade, but the viewership divide
has increased over time.
Last year, cable’s household
share (60.6) share was up 2%,
while broadcasters’ share (32.1)
was down 2%.

Cable television has
capitalized on a large
bandwidth and channel
capacity, advancing digital
technology as a “last-mile”
provider of content and services
and a favorable, growthoriented
business model that
follows the regulatory road
map provided by Congress. A
series of statutory provisions
and court decisions also has
helped the cable television industry
secure investment capital,
deploy new technology, expand
content and rapidly grow
audience share and advertising
revenue at the expense of
all local media. Cable systems,
unlike their broadcast counterparts,
are unencumbered
by the expense of producing
local content or statutory requirements
to serve in the
public interest, convenience
and necessity.

In an effort to survive, television
broadcasters have had to be
more creative in generating new
revenue streams. One example
is retransmission consent — a
means for local affiliates to negotiate
compensation from cable
systems for carrying their
local station signals.

The bad news in this bargain,
however, is that local network
affiliates are being asked
to share this retransmission
income with their networks.
The practice of networks paying
affiliates to carry network
programming is but a fond
memory. Some broadcast networks
also continue to invest in
their own cable-television networks
and content, drawing additional
viewers away from their
broadcast affiliates. It seems
television broadcasting cannot
help but feed on itself — a form
of economic implosion — resulting
in the continued detriment
to the bottom line.

A number of solutions
were rejected by the
FCC under the Bush
administration. Digital mustcarry
would have provided
additional channels, competition
and revenue for the local
broadcast stations, for example.
Absent some form of regulatory
relief, the problem will
eventually fall on Congress,
rather than the FCC, to correct.
The potential loss of regulated
outlets for lowest unit rate
advertising during election
campaigns should command
interest among incumbents
who rely on local broadcast
advertising as the best way to
preserve their seats.

As Daniel Patrick Moynihan
once said, “Everyone is entitled
to his own opinion but not his
own facts.” Here, the facts are
clear. The days when owning a
local television station was a license
to print money are gone.
Local television broadcasting is
in a financial death spiral that,
if left uncorrected, eventually
will result in the systematic,
if not total elimination of free,
over-the-air local television
broadcasting.

September