Network Affiliation Renewals Seen Signaling Networks’ Intent To Keep Out of Spectrum Auction
Recent renewals of network affiliation agreements, some early, seem to demonstrate that networks will stay out of the upcoming broadcast spectrum incentive auction, some attorneys said in interviews. LIN Media signed long-term agreements with CBS to renew affiliations in 10 markets, LIN said Thursday in a news release (http://bit.ly/1qkXRfg). A CBS affiliate in Indianapolis will move from LIN’s WISH-TV to Tribune’s WTTV (CD Aug 12 p12) and Gray Television signed renewal agreements with CBS and Fox (CD Aug 26 p15). Any intent to participate in the auction would require setting terms in contract agreements, an attorney said. The companies had no comment on that.
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A station owner thinking about “giving up the ghost” wouldn’t sign a long-term contract that would extend beyond the auction time, said Harry Cole of Fletcher Heald, unless the owner was “committed to staying with broadcasting.” The FCC largely wrote off network-affiliated stations as likely participants in the spectrum auction, said Scott Flick, a Pillsbury Winthrop attorney. But Davis Wright broadcast lawyer David Silverman doesn’t see a connection between the early renewals and the auction. “In the auction, you can just change channels or agree to share with another broadcaster,” he said. “I don’t think any of those things affect the network affiliation.” The network affiliates likely aren’t intending to turn in their channels, he said.
If a broadcaster has a long-term affiliation agreement that works well for it, and that provides a measure of security and continuity, “that’s conceivably a big bulwark that would lessen the pressure to turn the spectrum back in,” said Howard Homonoff, managing director at Homonoff Media Group and former lawyer at NBC’s cable networks. The long-term agreements have value for both sides and they protect the network and the affiliate, he said. “Networks want price assurance going forward.” They want to know that over a certain number of years, they have a certain number of households that will participate in a pool to help ensure that they can keep buying NFL football, he said. “That gives them some greater degree of assurance the next time the NFL rights come up.”
Broadcasters could include provisions in such agreements that relate to the auction if there is a desire to participate, said industry lawyers. The contracts might have provisions on changes that may be imposed on everybody as a result of the auction, Cole said. The industry knows that, according to FCC Chairman Tom Wheeler, there’s going to be an auction and a repacking, said Cole. “If everybody in the industry knows that and they're re-entering agreements that would presumably extend beyond when the auction would occur, then I'm guessing that those contracts include some provisions that address auction eventualities."
Almost any station is going to have lots of long-term contracts that will be hard to get out of if a broadcaster wants to participate in the auction, said Flick, referring to obligations like transmitter tower leases, studio leases and employment contracts. Unless a contract is fairly recent and “might have been negotiated and drafted around the idea of a spectrum auction, you're going to be actively putting yourself in breach by shutting down your business,” he said.
The other auction option on switching channels has no impact on the network affiliation, Silverman said. For example, Gray is putting a network on its digital stream and not its main channel, he said. CBS is OK with that because the end result is the same, he said: “They're going to be seen on the same on-screen channel on TV and cable operators will still want to carry the network, no matter what the source of it is.”