In the television business, distribution is the key component in making content accessible and viewable by consumers on traditional and new platforms. Distribution is not only the way programming reaches audiences, but is a large component of programmers and distributors business models.
Traditionally TV distribution used to be much simpler; it was primarily through TV and consumed on the TV set. In this old media structure there were barriers to reaching consumers, (you would have to own a network or have a program carried by one). Today broadband allows for video content to be carried and viewed on the web. Countless individuals and companies can now reach viewers in new ways with all types of video content.
Television is still the primary way people consume video but new devices and new content are beginning to change consumers viewing behavior. Viewers can watch traditional TV or now have the option to aggregate their favorite videos through many new options like Netflix, Hulu, Amazon, or TV Everywhere and watch them on their TV, or a tablet, phone or computer. The rise of new platforms to distribute TV content through DVR and VOD plus online viewership has resulted in a number of exciting developments for programmers and distributors, as well as real threats and challenges.
Right now television content distribution can be broken down into three categories: traditional distributors, new challenging distributors, and programmers that try to take advantage of all avenues of distribution. Programmers now distribute through the traditional multi-channel operators (Time Warner), phone companies (Verizon & AT&T) and satellite distributors (like Dish and DirectTV) and new avenues like apps, TV Everywhere through a cable operator or digital offerings like Netflix.
Traditional Distributors in the TV Market
MSO’s, satellite, and phone companies are actively trying to delve into the growing market of cross platform viewing and video streaming. A recent development is TV Everywhere.
Comcast successfully released Xfinity on demand and struck deals with cable networks, broadcasters, and pay TV to stream their content online for Comcast subscribers. Applications like TV Everywhere are being released by a multitude of distributors, allowing consumers to stream their carried programming on any tablet, phone or computer. Time Warner now has TWC TV and Cablevision has TVtoGO. Phone companies also provide online streaming; Verizon streams FiOS TV and AT&T streams U-verse.
In February, DirectTV joined the online game and released DirectTV Everywhere. For traditional distributors, “TV Everywhere” has become an important part of their distribution model. But their applications have a lot of competition coming from Netflix, HuluPlus and Amazon which offer library’s of content and more recently original or exclusive programming.
Rising Challengers to Traditional Distributors
The development of broadband as a vehicle for video has spurred huge entrepreneurial investment in companies like Netflix, Apple, Amazon, Hulu, YouTube as well as user-generated content. Traditional distributors are being challenged by new online distribution channels like Netflix, Hulu, Amazon, Apple TV, and Google (YouTube). These distributors are offering very appealing services to consumers and at low costs (Netflix & HuluPlus: both $8 a month and Amazon Prime $79/ yearly), or in the case of the web, Google or YouTube for free (you only need to have broadband). In addition, there is easy access through many devices like the computer, Xbox, iPad, etc with a wide range of content. We know this is appealing to consumers since Netflix recently grew to almost 28 million subscribers[1].
For the past few years Netflix, Amazon and HuluPlus have provided old shows, almost like a library service. This year Netflix shook up its programming strategy when it released original content “House of Cards”. They did what no distributor or programmer has done before: presenting an entire television series “House of Cards” to subscribers upfront. The viewer can than choose to watch the show all at once or at their own pace instead of once a week. In some ways, this strategy makes Netflix a competitor to HBO and cable channels. It also has blurred the lines as to what kind of company Netflix is: a distributor or original programmer? Further following a similar lead, Amazon is now promoting that they have exclusive content that you can only find and watch on Amazon[2].
Apple’s release of the Apple TV has further blurred the lines of traditional distribution; offering the perks of online streaming and TV together. Further Hulu Plus and other services are offered on the Apple TV [3]. These advancements have changed how the media works and how television content is distributed to consumers. Netflix offering original content, the Apple TV, Hulu Plus and Amazon’s exclusive content offerings shows how fast things are transforming in the distribution and video content business
TV Programming Distribution Strategies
Broadcast and cable networks, to stay competitive, have been dabbing into online streaming, tablet apps, and phone applications. Most cable networks do their best to offer applications that distribute some recent episodes, behind the scenes clips, best of clips, etc. However cable networks tend to limit the amount of long-form content because the distributors they partner with would not pay them as high of a sub fee for their programming. A critical part of the business model for cable programming services is maintaining a strong sub fee with distributors.
Cable channels like A&E, Discovery, History, Lifetime and many others have iPad applications. Disney offers “Watch” to stream ESPN and Disney Channel to computers and other devices [4]. Recently on the broadcast side, broadcasters have been making more content available on their websites and through services like Hulu. Since broadcast don’t rely on sub fees they have been much more aggressive in moving their content to other platforms than cable. And just this month ABC and CBS both came out with tablet applications to stream their television series.
Conclusion
Distributors have been and must adapt to new technologies, platforms and consumer demands. Despite the buzz that cable and broadcast are “dying mediums,” the Neilson graph below shows that while online viewership is increasing, people are still consuming a large percent of content on the TV set[5].
The real measure of the success of TV distributors will be how well their offerings satisfy consumer interests in viewing content how and when they want too. If the traditional distributors don’t provide it, new companies like Netflix and Apple will meet that demand.
Fox Television, owned by News Corp, is one of the “Big Four” television broadcasters in the United States, and also owns a wide portfolio of cable properties domestically. Fall 2012 was a busy time for many areas of the business.
In May 2012, Fox Television reached an agreement with Sinclair Broadcasting to renew the Fox affiliations on 19 Sinclair owned stations for five years. As part of the agreement, Sinclair paid $25 million for the Fox affiliation on WBFF in Baltimore, as well as an option to purchase the Fox owned and operated station in Baltimore, WUTB, by March 31, 2013. The station had served as leverage for Fox when negotiating with Sinclair, since Fox would threaten pulling the Baltimore Fox affiliation from Sinclair’s flagship, WBFF, and switching to their own WUTB. WUTB is the MyNetwork affiliate in Baltimore, and was unique as the only MyNetwork station owned in the Fox television portfolio. [1]
On November 29, 2012, Sinclair exercised the option to purchase WUTB, paying an additional $2.7 million. Because Sinclair owns WBFF in Baltimore, the sale is between Fox Television corporate, and a third party Deerfield Communications, controlled by sole shareholder Stephen Mumblow. Sinclair will control the station through operations contracts with Deerfield. Sinclair will also owe an additional $25 million to Fox, unless Fox exercises an option to acquire certain stations from Sinclair’s current portfolio. WUTB is the third Sinclair controlled station in Baltimore, as they also control the CW station, WNUV, owned by Cunningham Broadcasting- which is owned by the children of Sinclair’s shareholders. [2]
Fox Owned and Operated Stations Receive Uniform Graphics and Music Update
The Fox owned and operated stations (17 stations) rolled out a uniform graphics update for locally produced programming during the first week of November, 2012. The changes are for show and segment openings, as well as lower third graphics. The Fox rectangular logo has largely been replaced with the Fox name, and appears with 3D and circular elements. The standard music package has also been slightly adjusted. Finally, Fox owned stations have standardized the practice of showing reporter’s Twitter handles, rather than email addresses under their name on air. [3] [18]
Nexstar Broadcasting announced the completion of a deal November 5, 2012 to purchase Fox affiliate WFFF in Burlington, VT from Smith Media. Nexstar agreed to pay $17.1 million for WFFF and sister station WVNY, an ABC affiliate. Mission Broadcasting is also involved in the transaction due to media ownership laws. The FCC is expected to approve the transaction in the first quarter of 2013. Upon completion of the deal,Utica,NYNBC affiliate WKTV will be the only television station still owned by Smith Media. [4]
While Burlington, VT is DMA 97, it is an important market because it reaches a substantial Canadian market not counted in its DMA size. This includes Montreal, a city with ten times more population than the entire Burlington DMA. Canadian cable operators carry WFFF in the southern Quebec province as their Fox station.[5]
4 Northwest Broadcasting Fox Stations Pulled From Dish Network
Northwest Broadcasting pulled four Fox affiliate stations off of Dish Network after retransmission renewal negotiations broke down on November 26, 2012 over a dispute about rate increases. The stations affected are WICZ in Binghamton, NY; KMVU in Medford, OR; KFFX in Yakima, WA; and KAYU in Spokane, WA. After months of negotiations, a deal could not be reached, and the signals went dark to Dish Network customers.
The impasse comes only two months after a long blackout of the same stations ended with Dish competitor DirectTV. The Northwest- DirectTV battle lasted for over 22 months, and at times was hostile. [6]
LIN FOX Stations Almost Pulled From Charter
LIN TV threatened to pull two other Fox affiliates, WNAC in Providence, RI and WLUK in Green Bay, WI off of Charter Communications cable platforms if increased retransmission rates were not agreed to by November 29, 2012. Charter claimed that LIN was demanding 150% increases in fees. [7] At the last moment before the stations were scheduled to go dark, the two sides reached a deal for undisclosed terms. [8]
Syndication
Fox O&O Stations Purchase Syndication Rights to Anger Management
Charlie Sheen stars in Anger Management on FX [20]
Fox owned and operated stations signed a syndication contract in October, 2012 to begin airing the FX sitcom Anger Management starring Charlie Sheen beginning in the fall of 2014. FX will retain the cable syndication rights sold by Lionsgate Television. Lionsgate’s television division plans to produce 90 episodes over the next two years in order to fulfill syndication requirements. This follows a model the company has used in the past to get syndication fees sooner. Anger Management averaged 4.5 million viewers per episode during its initial summer run; new episodes begin in January. [9]
Fox O&Os Purchase Rights to Veteran’s Day Parade
The 2012 NYC Veteran’s Day Parade aired on Fox Stations [21]
Fox owned stations came to an agreement with the Wounded Warriors Project for the television rights to the New York City Veteran’s Day Parade for the first time in 2012. Fox owned stations aired the parade live or tape delayed (depending on local NFL games) with cut-ins from Fox News cable network. The live showings of the parade aired Sunday November 11, from Noon until 3:30 Eastern time. [10]
Bethenny Frankel Daytime Show Picked up by Fox Owned Stations
Fox owned and operated stations have signed a syndication deal to air the daytime talk show Bethenny, hosted by former reality television star Bethenny Frankel, and executive produced by Ellen DeGeneres. The show was left for dead in 2012, after it failed to achieve Fall 2012 clearances, but Fox kept the show alive by airing it on six owned stations for a trial period of six weeks during the summer. The positive results gave enough of a sample and momentum for Warner Brothers Distribution to syndicate nationally in other markets. The show is expected to premiere in early 2013. [11]
On November 20, 2012, News Corp, agreed to purchase a 49% ownership stake in the YES Network. A specific price was not released, but analysts estimate the network to be valued at $3 billion. News Corp completed the deal with Goldman Sachs and Providence Equity Partners. The contract includes a path for Fox to increase its ownership stake to 80%. YES has rights to air New York Yankees baseball through 2042, and is expected to be used as leverage to increase retransmission rates and clearance for other Fox properties in the nation’s largest market and surrounding areas. [12]
Sports
Fox launches Saturday Night Football and Baseball
Erin Andrews Joined Fox to Anchor Sports Coverage [23]
For the first time in 2012, Fox aired weekly college football games on Saturday nights anchored by the popular Erin Andrews. Fox drew ratings as high as a 3.5 overnight, on a night previously ignored by networks and viewers. Fox also moved its Saturday afternoon baseball to Saturday nights, seeing ratings increases of over 25% for the season. [13]
Legal
Fox Denied in Suit Against Dish Network’s DVR
United States District Court ruled on November 29, 2012 against Fox Broadcasting in its attempt for an injunction against Dish Network’s advanced DVR and ad-skipping technology. The court found that Fox was not likely to succeed on the merits of copyright infringement against the DVR service, and that Fox had failed to show irreparable harm caused by the “quality assurance” ad-free copies made to show customers. [14]
Technology
Fox Joins with Dyle to bring Television to the iPad
Fox has joined a consortium of broadcasters to allow people to legally watch the Fox television network for free on their iPad. Called Dyle, the program requires an antenna adapter since the device does not use the internet, instead using television broadcast signals. The technology is improving, and is a large step towards bringing television to the iPad. [15]
Performance
1st Quarter Financial Data for News Corp.
News Corp’s 1st Quarter (July-Sept) financial data showed a slow start to the television year. Overall company revenues were up 2.2%, but operating income down .5% to $1.38 billion. The company reported higher than expected political advertising spending, and a more than doubling on average of retransmission rates, but also had a poor start to the network season ratings. The Fox broadcast network and owned and operated stations posted a 17.3% increase in operating income to $156 million, while Fox cable properties showed 23% increase in operating income to $953 million.
The scatter market was not robust as the company had hoped, and the Olympics siphoned off some potential revenue, but Fox is working towards its stated goal of a dual revenue stream of retransmission revenue and reverse affiliate compensation. A low- rated four game World Series and poor fall launches hurt the quarterly performance, but projections for the 2nd Quarter are more optimistic. [16]
Traditionally TV distribution used to be much simpler; it was primarily through TV and consumed on the TV set. In this old media structure there were barriers to reaching consumers, (you would have to own a network or have a program carried by one). Today broadband allows for video content to be carried and viewed on the web. Countless individuals and companies can now reach viewers in new ways with all types of video content.
Television is still the primary way people consume video but new devices and new content are beginning to change consumers viewing behavior. Viewers can watch traditional TV or now have the option to aggregate their favorite videos through many new options like Netflix, Hulu, Amazon, or TV Everywhere and watch them on their TV, or a tablet, phone or computer. The rise of new platforms to distribute TV content through DVR and VOD plus online viewership has resulted in a number of exciting developments for programmers and distributors, as well as real threats and challenges.
Right now television content distribution can be broken down into three categories: traditional distributors, new challenging distributors, and programmers that try to take advantage of all avenues of distribution. Programmers now distribute through the traditional multi-channel operators (Time Warner), phone companies (Verizon & AT&T) and satellite distributors (like Dish and DirectTV) and new avenues like apps, TV Everywhere through a cable operator or digital offerings like Netflix.
Comcast successfully released Xfinity on demand and struck deals with cable networks, broadcasters, and pay TV to stream their content online for Comcast subscribers. Applications like TV Everywhere are being released by a multitude of distributors, allowing consumers to stream their carried programming on any tablet, phone or computer. Time Warner now has TWC TV and Cablevision has TVtoGO. Phone companies also provide online streaming; Verizon streams FiOS TV and AT&T streams U-verse.
Apple’s release of the Apple TV has further blurred the lines of traditional distribution; offering the perks of online streaming and TV together. Further Hulu Plus and other services are offered on the Apple TV [3]. These advancements have changed how the media works and how television content is distributed to consumers. Netflix offering original content, the Apple TV, Hulu Plus and Amazon’s exclusive content offerings shows how fast things are transforming in the distribution and video content business![[15]](https://bejone03.expressions.syr.edu/trf594/files/2013/04/watchespn-e1344529462661.jpg)
Cable channels like A&E, Discovery, History, Lifetime and many others have iPad applications. Disney offers “Watch” to stream ESPN and Disney Channel to computers and other devices [4]. Recently on the broadcast side, broadcasters have been making more content available on their websites and through services like Hulu. Since broadcast don’t rely on sub fees they have been much more aggressive in moving their content to other platforms than cable. And just this month ABC and CBS both came out with tablet applications to stream their television series.
