The companies are negotiating potential deals after Rupert Murdoch’s company told Tribune Media that on January 17 Fox will withdraw its affiliation agreement with Tribune’s KCPQ-TV in Seattle. Fox has longed to have its own station in the city, or at least more lucrative financial terms with a broadcaster in the home of the NFL’s Seattle Seahawks — the winner of the 2014 Super Bowl. The companies have been “conducting ongoing discussions” about the local affiliation arrangement since 2013, Tribune says, confirming a story today in the New York Post.
The team’s success gives the station leverage to demand high fees from cable and satellite companies that want to carry its broadcasts. Some of the cash also goes to Fox which, along with other networks, charges affiliates what’s known as “reverse compensation.” That’s led to growing tensions as networks and affiliates try to determine how much stations should pay. Tribune says that “a variety of alternatives have been discussed and there is no resolution at this time.” Still, it’s “prepared for all operational and economic possibilities for our Seattle Fox station” — which accounted for about $13M in cash flow (EBITDA) last year — and is “confident that our remaining 13 Fox affiliates will remain unaffected based on regulatory and contractual constraints.”
The football-related showdown in Seattle mirrors a recent one involving CBS in Indianapolis. The network shifted its affiliation to Tribune’s WTTV after it offered better terms than LIN’s WISH, which had carried CBS for 58 years.
Other switches may be in the offing as networks look for revenues anywhere they can find them. “While stability and long-term relationships clearly have value to a broadcast network, the ad model for the television broadcast business is under pressure with retrans-paying [pay TV] subs in (slow) secular decline, forcing network owners to become far more aggressive financially,” BTIG analyst Richard Greenfield says.