CBS’s New Retrans Weapon? CBS OTT

Net Extends Free ‘All Access’ Trials to Blacked-Out Affiliates
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CBS affiliates could have a new weapon in the wars over retransmission consent: extended free trials of the parent network’s CBS All Access over-the-top service.

The online alternative could give them a leg up in negotiations while helping the mothership drive awareness of the online product to a motivated customer base.

The first unofficial test of the concept appears to be in San Diego, where CBS affiliate KFMB — owned by independent Midwest Television — has been locked in an ongoing retrans battle with DirecTV. KFMB went dark to DirecTV customers in San Diego on Aug. 13 after the two parties could not reach a new agreement.

The dispute is primarily over pricing — DirecTV said the station wants to double its rates, while KFMB counters it only wants fair compensation — and both sides say they are continuing to talk to hammer out a deal.

But in the meantime, KFMB is offering San Diego residents a two-month free trial of CBS All Access — the typical free period for new customers is one week — to help them through the blackout period. While KFMB vice president and general manager Pat Nevin said the promotion is not limited to DirecTV subscribers, the idea for the promotion stemmed from the retrans spat.

A ‘COMPETITIVE ADVANTAGE’

Nevin said response to the CBS All Access promotion has been good. Because of the terrain in the area, over-the-air reception is poor, he noted, which makes receiving the No.1-rated station’s signal via an antenna difficult. Other distributors in the market, including Cox Communications, AT&T U-verse TV and Time Warner Cable, have existing retrans agreements with the station.

“I think it’s a competitive advantage,” Nevin said. “We want our news production and Judge Judy and CBS primetime in our viewers’ hands. The response has been very positive, and it’s another nice thing to offer our viewers — to say, ‘If an antenna doesn’t work, check out All Access.’ It really does help soften the blow of the loss of programming to our viewers.”

CBS has been one of the industry’s biggest recipients of retransmission-consent fees. The broadcaster estimates it will reap about $1 billion in retrans and reverse-compensation fees from distributors and affiliates by the end of 2016, doubling that take to $2 billion by 2020.

And at least for now, CBS appears to be in a unique position relative to broadcast OTT services. To date, it is the only broadcaster to make its network and local programming available over-the-top.

CBS Interactive, which oversees the All Access service, declined to comment. But people familiar with the company’s thinking said it saw the San Diego situation as a marketing opportunity for the fledgling service. And though CBS Interactive isn’t actively seeking out additional retrans-negotiating stations, it will extend promotions to affiliates that ask for it in exchange for stepped-up marketing efforts.

The All Access service has previously extended promotional periods in specific areas and via specific offerings. For example, it had a one-month free trial for Roku customers when it launched service with that product, and it extended the free trial period around specific holiday retail events like “Black Friday” and “Cyber Monday.”

“It essentially gives them more skin in the game,” said one person familiar with the company’s thinking.

CBS has said all along that it did not launch All Access as a replacement or competitor to cable, telco TV or satellite service, but rather as a complement. So far, at least one cable operator has agreed to distribute the OTT offering. Last month, Cablevision Systems, as part of its overall carriage agreement with CBS, agreed to offer All Access to its broadband customers. Launch dates and pricing are expected to be announced soon.

While one broadcaster’s OTT offering won’t replace traditional pay TV service, carriage fights with broadcasters certainly can help enhance awareness of the product, as well as lessen the impact of lost viewers to the network. And CBS has gained considerably more clout as it has signed on more local stations.

CBS launched CBS All Access in October 2014 with network primetime shows, local content from its 16 owned-and-operated stations, and library content with 6,500 episodes of shows ranging from classics like I Love Lucy to more current programs like The Good Wife for $5.99 per month. A flurry of recent deals has expanded the local scope of the service to more than 125 markets, or about 85% of the country. The “live local” capability, which allows customers to stream local news and other shows as they are broadcast, is currently available in 59 markets and counting.

KFMB cut an affiliate deal with CBS All Access in June, so its news and other local programming is available to the streaming service’s subscribers.

NFL STILL SHUT OUT

While CBS All Access offers subscribers in the market unfettered access to primetime hit shows like The Big Bang Theory, it lacks a key piece of fall programming: National Football League games. DirecTV customers have already missed three preseason San Diego Chargers games in the market, and though the regular season begins on Sept. 10, local fans won’t feel the full impact of the blackout until later in the month. The first Chargers game isn’t on CBS until Sept. 20, and hopefully a deal can be reached before then.

“The Chargers are a big draw here and the fact that we missed three Chargers games; that hurts,” Nevin said. “We’re the local rightsholders for those preseason games — we produce the games, we hire the talent, we hire the truck, we hire the production crew, we pay a rights fee, and DirecTV customers overindex on football viewership. That’s a loss; there is no question about it, and one that we are looking at very closely.”

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