Unless The FCC Acts, Some Stations Face Reduced Local News

It’s hard to believe, but a loophole in Federal Communications Commission regulations is threating the ability of television stations across the country to continue producing high-quality local news, severe weather coverage and local programming.

Back in 1992 when Congress created a statute enabling television stations to finally put in place a second revenue stream (other than advertising) by negotiating fees from cable and satellite companies, no one could have predicted the advent of the internet and its subsequent threat to all traditional media. Thirty years later, television advertising has been so devastated by Big Tech that it can no longer fully fund stations’ ability to produce local news, emergency coverage and local programming.

Television stations now potentially face the same fate as local newspapers, which are shadows of their former selves.

Why has television advertising taken such a hit? The local ad marketplace has been massively disrupted by the growth of Facebook, YouTube, Twitter, Amazon, LinkedIn and the many other internet content providers, and things are getting worse every day.

Zenith Media predicts that of the $320 billion spent on the entire media universe this year, $200 billion will go to digital media. In other words, almost two-thirds of every advertising dollar spent in the U.S. in 2022 will go to digital advertising. It’s no wonder that local media find it tough to compete.

Adding insult to injury, much of the local information that appears on Facebook, YouTube and any number of other sites was created by television stations that receive only token compensation for their work.

All of this means that cable and satellite fees now fund the ability of television stations to produce quality local news and emergency services. Without retransmission payments, it would be impossible to maintain today’s high level of services.

Now a new and urgent threat from Big Tech is hurting even the lifeblood of those fees. Unregulated, lowball providers are competing with cable and satellite companies for customers, hurting those businesses and reducing payments to stations.

The threat is called Virtual Multichannel Video Programming Distributors (vMVPD) which is a big name for virtual cable providers that use the internet to distribute their signals. I’ve written about them in other contexts. You know their names:  YouTube TV, Hulu +Live TV, Sling TV and others.

Because they operate in the loophole of the internet, vMVPDs have no obligation to local communities, no obligation to carry tornado or hurricane warnings, no obligation to caption programming, no obligation toward diverse workplaces. Because they do not have to honor network exclusivity agreements, they can negotiate directly with ABC, NBC, CBS and Fox, cutting local affiliates off at the knees. If stations want to be carried, they must accept a pittance of their regular fees as a handout from the networks.

Using teaser starter rates, these services get consumers to drop their cable or satellite providers, only to raise prices later.

Because they have no obligations to consumers, vMVPDs are dangerous in other ways. Back in December, viewers of ABC affiliates on YouTube TV were suddenly deprived of all local service, including news and emergency warnings, for two days due to a conflict between YouTube TV and Disney/ABC. Affiliates were not given a choice, or even a heads up.

Today it is estimated that 15%-20% of live television viewers subscribe to a vMVPD. Some analysts say up to one-third of all current cable/satellite users could move to virtual services. Competition from vMVPDs is one reason DirecTV has shed record numbers of customers the past few years. It is now trying to move users to its own unregulated product called DirecTV Stream.

When Congress created the 1992 legislation requiring cable and satellite systems to negotiate with local television stations for carriage, the vote was bipartisan and overwhelming, making clear Congress’s intent to protect local television. The FCC was tasked with enforcing that intent which is now being clearly violated by virtual cable systems that negotiate directly with the networks, cutting stations out.

Let me also point out that according to at least one major negotiator, networks are now asking for 70% of station retransmission dollars. Add to that gut-wrenching figure the pittance stations gain from virtual system agreements, and you have a recipe for disaster. Without reform, we face the very real possibility that a great number of stations will be forced into lower-quality news and other services.

If the FCC chooses to, it can correct this massive wrong simply by requiring internet cable providers to follow the same rules as regular cable and satellite systems. That would level the playing field for everyone.

The ball is now in the hands of FCC Chairwoman Jessica Rosenworcel. It is imperative Chairwoman Rosenworcel put the regulation of vMVPDs on the commission’s agenda for its next meeting. This is a bipartisan issue, so there is no need to wait for confirmation of an additional commissioner.

The FCC first looked at the vMVPD problem back in 2014, so reform is long overdue. There is simply no reason to wait any longer. If Chairwoman Rosenworcel truly cares about the safety and well-being of the American public, she will act this year because the problem grows graver every day.

Survey after survey show that local television is now the most trusted source for unbiased news in our nation. If you value local television news, if you depend on television for continuous coverage during tornado or hurricane warnings, if local programming is important to you, then this is your issue.

Now is the FCC’s opportunity to do the right thing for local television, and even more importantly, the American public. It is crucial that Chairwoman Rosenworcel act now.

Hank Price is a media consultant. His second book, Leading Local Television, has become a standard text for television general managers. In a 30-year general management career, Price led TV stations for Hearst, CBS and Gannett, including WBBM Chicago, KARE Minneapolis, WVTM Birmingham, Ala., and both WXII and WFMY in Greensboro/Winston Salem, N.C. Earlier, he was a consultant with Frank N. Magid Associates. Price also spent 15 years as senior director of Northwestern University’s Media Management Center. He is currently director of leadership development for the School of Journalism and New Media at Ole Miss.