La Carte Cable Pricing and the Future of Local Broadcast Television

Abstract

Television has been a staple of the American lifestyle since its adoption in the 1950s. Advertising has been the primary source of revenue for local stations, although many stations strengthened their bottom line with compensations paid by their parent network. In the late 1980s and early 1990s, local broadcast stations were faced with a more fragmented audience due to the rapid growth of cable television. National networks stopped compensating local broadcast stations in the early 2000s, making it more difficult for local broadcast stations to maintain their revenue streams and profit margins. In 1992 Congress created retransmission consent to ensure that broadcasters would be able to negotiate with cable and satellite operators for fair compensation for their programming. Cable operators resist retransmission compensation, saying it has raised programming costs and resulted in higher prices for consumers. The higher costs are passed along to consumers in the form of subscriber fees. Many politicians, consumers, and industry groups have been concerned about the high prices of cable television service and have been researching ways to reduce fees. One alternative to high subscriber fees is offering channels a la carte or on an individual basis. A mandated a la carte delivery option would significantly change the way cable operators and local broadcast stations would negotiate retransmission compensation. The major findings in this study include the significance retransmission fees have on the financial health of local television stations, the importance of retransmission negotiations between cable operators and local broadcast stations and the impact offering programming a la carte could have on local broadcast television.