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Broadcast Needs a Second Revenue Stream

A number of items in the news recently are leading me to the same conclusion. Those items, In no particular order: ESPN expands local internet offerings in major markets–a clear and present threat to one of local broadcast news remaining differentiators; NBC and their private equity partners latch onto an internet veteran (the respected Mike Kelly) to run The Weather Channel (and inevitably, ironically, continue to disintermediate the local weather market, once controlled by broadcast TV and radio; Jeff Zucker hands the network TV reins to cable exec Jeff Gaspin, saying “the Cable Model is superior;” the broadcast upfront is finally closing some ad deals as August encroaches, but with lower CPMs, lower ratings, and therefore lower revenues; and finally, across the country, local news departments are continuing to lay off key personnel and merge operations with competitors to save money and return profits.

Here’s the conclusion: it’s high time for the federal government to further de-regulate the broadcast industry. Regulation made sense back in the middle of the 20th century, as broadcast license holders were given the precious commodity of broadcasting bandwidth, with its limited and valuable distribution access to millions of Americans. Initially, even as technology stretched the playing field, cable operators were protected by the theory that Americans were entitled to over-the-air broadcast channels and cable operators shouldn’t have to pay the broadcasters, even as they were profiting from their programming. (Eventually broadcasters got some measure of revenge through must-carry rules and ownership leverage but arguably, that came a day later and a dollar shorter.)

Broadcast television desperately needs a second revenue stream or local stations (and their over-the-air viewers) will suffer even more. That revenue stream, to augment ad dollars, is subscription fees. There is a precedent. Cable distributors get fees from viewers but only pass along that revenue to broadcasters indirectly via must-carry leverage. And so far, broadcasters have had only limited success selling their programming to viewers via digital distribution (iTunes) and analog distribution (Netflix, Blockbuster, Walmart.) In the case of digital internet distribution, not only are distributor “partners” are threat–so too, unfortunately, is piracy. Once upon a time, broadcasters had all the leverage. But the balance of power has shifted and it’s time the government realized it. Otherwise, the American public will be deprived a great platform for entertainment and information.

Erik Sorenson is chief executive officer of Vault.com, Inc. He oversees the strategic direction of the global, New York-based media company, including ShopTalk & TVSPY. If you would like to comment on Remote Control, or want to reach Erik, email remotecontrol@tvspy.

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