As TV Networks Use Web, Affiliates Seek Piece of the Action

[SOURCE: Wall Street Journal, AUTHOR: Brooks Barnes brooks.barnes@wsj.com]
A civil war is simmering beneath the surface of the television business. On one side are big networks such as Walt Disney Co.'s ABC and CBS Corp.'s CBS, which are aggressively courting new business opportunities in digital media, cutting deals to distribute hit programs in cyberspace. Confronting the giants are local television stations angry that their affiliated networks aren't giving them a bigger piece -- or in some cases any piece -- of the action. So far, affiliates have mostly engaged in saber rattling. But that's starting to change, with stations demanding that networks include them as partners in digital endeavors. "We aren't going to be accidentally -- or purposely -- left out of the equation," says David Rehr, president of the National Association of Broadcasters. Most of the nation's TV stations are owned by independent companies that contract with the national networks, much as car dealerships are linked to auto makers. Networks need affiliates to reach the biggest possible audience and command higher rates from advertisers. Affiliates need strong network programming to help their own local ratings. The two sides have jostled for years over how much control networks have over affiliates. In the early days of TV, the fledgling networks were the weaker partner, enticing station owners to sign on with them. But today many affiliates say they're getting marginalized as a result of networks being able to own dozens of stations themselves due to federal deregulation. Stations were more willing to put up with diminishing power while they were still cash cows faced with little competition. But the station business is increasingly under attack. TV-station advertising dropped 8% in the first nine months of 2005 to $12 billion, according to the Television Bureau of Advertising. The outlook doesn't look much better: The troubled auto manufacturers are local TV's biggest customer, accounting for about 29% of $16 billion spent on local advertising each year. Among the other problems facing stations: Beefed-up on-demand offerings from big cable operators, the proliferation of sports events on satellite and cable and the shift of local news and weather services online.
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