The financial implications to the broadcast industry and the broadcast networks specifically are monumental. There was a time, not too long ago, when the broadcast networks were paying their affiliates a fee to air the network's programs(because the logic was, affiliates were providing an audience). Then the cable industry began to blossom and broadcast ratings began to shrink....along with affiliate compensation. Today affiliate fees are non-existent and the new broadcast model is evolving into the cable model.......two streams of revenue (advertiser supported and subscriber fees). We are in the infancy stage of this new paradigm but very quickly the broadcast nets will enjoy a significant contribution to their overall revenue from the Cable Industry. 

Here is how it's going to work:  As cable (Cablevision, Time Warner, Cox, Comcast, etc.) contracts expire, the over-the-air stations will demand payment for their programming....and they will get it! If the station is owned and operated by one of the broadcast networks, 100% of those newly negotiated cable sub fees (that the cable co. will be paying the broadcast station) will stay within the ownership group (Disney, News Corp, CBS, GE). If the station is an affiliate, a portion (let's say 50%) will stay with the station and the other 50% will go to the broadcast network. These negotiations will take place on a market by market, station by station, and cable provider by cable provider basis over the next few years. It will be a painstaking process and we will all feel the effects (more Academy Awards and BCS type interruptions) time and time again. But the payout for the broadcast networks is enormous.....how about a half of billion annually when all the deals are concluded. Not bad when you consider that represents about 25% of their total ad revenue in Primetime. 

This new found revenue source to the networks is terrific news for advertisers. Why?....Because the broadcast network will continue and most likely increase their investment into program development.....an area that has been internally scrutinized heavily in recent years. Better programming leads to higher ratings, more engaging shows and provides a more valuable communication platform for advertisers to promote their goods and services.  TV works and it works even better with better ratings.

So what's the downside? There's always a downside.....keep an eye on your cable bill because it will be going up! 

Best, 

PK