Key Points
- The FCC has opened a probe into the business relationship between broadcast networks and local affiliated stations.
- FCC Chairman Brendan Carr is leading the investigation.
- Carr previously targeted ABC for perceived malfeasance in their business dealings with local TV stations.
The Federal Communications Commission (FCC) has opened a proceeding to receive public comments on the relationship between local broadcast television stations and the networks they’re affiliated with.
The investigation, spearheaded by FCC Chairman Brendan Carr, is largely predicated on complaints by owners of local broadcast stations that large networks charge exorbitant affiliate fees for their entertainment, news and sports programming while simultaneously relegating those same shows to their own streaming services.
The trend has cannibalized the local viewing audience that broadcasters rely upon for their business, and the higher fees charged to local TV stations is passed on to cable and satellite distributors in retransmission consent agreements, which lead to higher bills for pay TV subscribers.
Late last year, Carr signaled his willingness to hold broadcast networks to account when he fired off a letter to Disney CEO Bob Iger inquiring about ABC’s business dealings with the owners of their affiliated stations. ABC is owned by Disney.
The probe comes about two months after two large ABC affiliate owners, Nexstar Media Group and Sinclair, pulled the late night program “Jimmy Kimmel Live!” from their stations following a politically-tinged monologue delivered by host Jimmy Kimmel. There were no public complaints about the monologue until two days later, when Carr took issue with Kimmel’s speech during a podcast interview. Carr encouraged ABC affiliates to “pre-empt” Kimmel in response, and Nexstar and Sinclair — which have business dealings pending before the FCC — pulled the show a few hours later.
Carr distanced himself from any influence on the Kimmel manner, saying the two companies were merely adhering to the public interest obligations of their broadcast licenses. Likewise, in a public notice issued on Wednesday, the FCC said the investigation into the business dealings between broadcast networks and the owners of their affiliated stations was rooted in the idea that some broadcasters might be prevented from fulfilling their public interest obligations based on the business priorities of the networks.
Federal lawmakers and FCC regulators have never put a firm definition to the term “public interest.” Nonetheless, it appeared 18 times in the document. Through the FCC, Carr said that the matter deserved the agency’s scrutiny now in light of recent events, and because the relationship between networks and local stations had not been examined by the agency in more than a decade.
“Stakeholders representing the interests of affiliated or local television broadcasters have suggested that, in this time, an imbalance has developed in this relationship — that the horizontally and vertically integrated companies that now own national programming networks, cable companies, and streaming platforms can overpower affiliated broadcast television stations,” Carr, through the FCC, said. “This imbalance, in their view, frustrates local broadcasters in their efforts to fulfill their public interest obligations.”
Carr has suggested a number of remedies to the issue, which he framed as exploratory questions that are deserving of public comment. Specifically, he wants to know if it is time to refresh certain rules and regulations to give local TV station owners greater ability to pre-empt or pull shows that they do not like.
The FCC already has a rule that largely prohibits broadcast networks from preventing a local station from pre-empting shows in the event of breaking news; Carr wants to expand the same prohibition to content that is “unsatisfactory or unsuitable or contrary to the public interest” — which, again, the agency and lawmakers have never defined.
Carr also wants to know if the broadcast networks are shifting more of their highly-prized entertainment and sports programming to streaming platforms in order to gain greater business-related leverage over local TV station owners when affiliate agreements are renewed. He noted that, in the past few years, broadcasters like Fox and NBC have offered simulcasts of the Super Bowl and the Olympic Games on their own commercial streaming platforms.
“Does a network’s growing focus on their streaming platforms suggest that the networks hold considerable leverage today in their contract negotiations with their affiliates?” Carr questioned. He also wondered if the networks were imposing “burdensome and restrictive terms in the affiliation agreements” that prevented broadcasters from investing in local news or otherwise carrying out their obligations, though he didn’t offer any examples to that effect.
Last, Carr floated the idea that broadcasters and local TV stations should be required to negotiate new affiliation contracts with good-faith efforts, mirroring a requirement that exists between broadcasters and pay TV providers during negotiations over distribution deals. He didn’t explain why he thought that might be a good solution; despite the good faith requirement, programming disruptions have grown more common in the pay TV industry due to onerous financial demands of broadcasters, with local TV station owners being among the biggest offenders.
But, he suggested that the situation afflicting pay TV companies may actually be more on the networks than on local stations, with the implication being that local station owners are merely passing on the cost of doing business with the networks. Though Carr acknowledged that the FCC may not have the legal authority to impose similar rules in negotiations between broadcasters and networks — so, the FCC is seeking public input on that element, too.
None of the hypothetical solutions are codified in a Notice of Proposed Rulemaking (NPRM), which means no potential regulations are on the table. But, depending on the feedback the agency receives — or, more likely, the political desires of Carr’s boss — a set of proposed rules could along the lines of what Carr suggested could come in the near future.
