DIRECTV has faced enough of these programming blackouts that one of its top executives said it may be time for the company to consider whether it’s worth offering local stations at all.
“We’re starting to get to a point where enough’s enough,” DIRECTV Chief Content Officer Rob Thun told Cord Cutters News on Thursday. “We need to consider whether we need local broadcast in our lineup, because it’s driving up prices.”
On late Thursday, DIRECTV lost 64 ABC, CBS, NBC, and FOX stations across 51 markets when it failed to agree to a new retransmission deal with Tegna. It marked the second blackout for DIRECTV, with the pay-TV provider having just settled a similar dispute in the summer with Nexstar, ending a two-and-a-half month-long blackout with even more local stations. Thun said the two sides were “extremely far apart,” with Tegna asking for the highest rates he’d ever seen.
Tegna, for its part, said it’s just seeking fair compensation for the local and national content its stations provide, and said it is committed to reaching an agreement.
But as Thun sees it, there’s only one direction this can go if DIRECTV agrees to the rates Tegna is asking for. The high retransmission costs will lead to higher prices for consumers, which will spark more defections and ultimately less revenue for local brandcast companies, which gets paid per subscriber, leading to the them asking for more money, with the cycle ending with the death of pay TV. Just a few weeks after the Nexstar agreement was struck, DIRECTV hiked the price of all of its services, from its satellite offering to DIRECTV STREAM.
“If we continue this pattern…we’re going to drive this business off a cliff,” Thun said.
“Customers are voting with their wallet, and telling us pay TV is too expensive,” he added. “That clear message isn’t resonating with the broadcasters. They’ve got to realize that’s the world we’re living in.”
As a counter proposal, DIRECTV offered Tegna an a la carte plan that would let the company set whatever price it wants for the local stations, which then would be passed directly to its subscriber. He said there was a disconnect between how DIRECTV valued local content and how Tegna valued it, so it invited Tegna to price it to consumers as it sees fit.
Tegna rejected the offer, and in a statement to Cord Cutters News, bashed it as an attempt to pass on another fee to its subscribers.
“DIRECTV’s proposal to instead require its customers to pay yet another standalone fee for our local stations – unlike all other broadcast stations – disserves subscribers and is not productive,” the company said.
The idea of paying a separate fee for access to local stations could be radical for some consumers, who are used to the channels being bundled in any cable TV package. People can also access them for free over the air via an antenna, or access some of them through free, ad-supported platforms like Pluto TV or Local Now. But the notion speaks to DIRECTV’s state of mind and how it may need to reconsider the role of local stations in its lineup.
While Thun’s words about potentially breaking up with local broadcasters may also be posturing in the midst of a dispute, the company is already preparing subscribers to move to alternatives. The company sent its business customers antennas to grab the free over-the-air signals at their establishments. Because of majority of the local stations are NBC and CBS affiliates, DIRECTV is driving customers towards Peacock Premium, which offers NBC sports and a feed of their local NBC channel for $11.99 a month, and Paramount+ with Showtime, which also includes a live local feed and CBS sports. DIRECTV already offers a discounted bundle with Peacock. Thun hinted that one scenario for the future would be to work with the streaming services instead.
Thun also said that Tegna rejecting the la carte model isn’t a deal breaker, but that the company has drawn a line in the sand when it comes to Tegna’s “preposterous rate increase.” As a large contributor of Tegna’s bottom line, Thun said the local broadcasting company can ill afford to go offline too long.
“Every time there’s a blackout, the prices go down,” Thun said, referring to negotiations for the rate increases. “I don’t know what we have to go through this every time.”