The ink wasn’t even dry on the the new deal between FOX (and several Fox cable properties) and Time Warner Cable before we saw the first comment suggesting that broadcast can improve its fates by investing the newly found money on programming. Sadly details were not released, so we don’t know exactly what FOX got other than it was probably significantly more than it was receiving before. My guess is that ultimately as existing deals expire it will be the template for other cable, telco and satellite providers for all the major broadcasters.
But what will the networks actually do with the money once they have it? In an article by Broadcasting & Cable’s Page Albiniak focusing on the Syndication landscape, there is a good quote from Warner Bros. Domestic Television Distribution president Ken Werner:
“I think retrans will improve the economics of TV stations, but there is a question as to what TV operators want to do with the revenue it generates,” says Werner. “Some will invest in news, some will drop it to the bottom line, and some will invest in programming. What they do will be a function of that particular broadcaster’s priorities and economic circumstance.
“The question is: Are broadcasters willing to invest in programming to maintain and build audiences that have been loyal to them in these dayparts? The real change comes in 2011, when all of those Oprah viewers are set free. Where do they go? Do broadcasters allow them to go to cable? If you want to build and maintain your business, you need to invest in it.”
Though the quote is focused on retransmission revenue at local TV stations rather than revenue for the broadcast networks, the questions and issues for the broadcast networks are very similar.
Will they use the extra cash to offset any advertising losses and drop it to the bottom line, or will they use it to make bigger investments in programming? My guess is more the former than the latter, unless the networks really believe that increased investment in programming is what’s necessary to stem the tide of more viewers switching to cable.
But I think it more likely that the party line from the broadcast nets will be something along the lines of “increased retransmission fees allowed us to sustain the high level of investment in programming we were already making.”