Relations between the three television networks
and their affiliate stations always have been sensitive and unstable. Nowadays
they're more volatile than ever.
They still need each other for entertainment and
news, but for how long? At times, they seem to compete more than cooperate.
NBC, with CNBC, and ABC, with ESPN, own cable
operations that contend for segments of the same audiences sought by their
local affiliate stations. Both networks also have irritated their affiliates
with forays into pay-per-view sports. The networks, in turn, are upset
that many affiliates air local news instead of network cartoon shows on
But it is the continuing struggle over "compensation"
that is most indicative of the delicate and mercurial nature of the network-affiliate
Since their inception, the networks have supplied
stations with programs. In return for airing those programs, the stations
receive money – officially called compensation – from the networks. They also
are allotted time during the programs to sell local commercials.
It's been a profitable venture for both parties.
But in recent years competition from cable and independent stations has
made the television business more financially challenging.
During the past few years, the networks have been
reducing the compensation paid to the stations. The affiliates have howled
but have reluctantly agreed to cuts because they've had little choice.
For numerous reasons, changing affiliation usually is not feasible and
wouldn't help much when every network is slashing compensation.
So, in retaliation, the locals are airing fewer
low-rated network programs. The stations replace network shows with syndicated
entertainment programs, movies or news specials and keep all the money
from commercials. The network gets nothing. For many affiliates, particularly
those in smaller markets, compensation is crucial to their economic well-being.
Privately, network officials have called the compensation
system antiquated. However, both network and station executives agree that
compensation is the backbone of the network structure.
"Compensation is the glue that makes the network-affiliate
relationship unique in the television business," says Wayne Godsey, vice
president and general manager of KOAT, the ABC affiliate in Albuquerque.
"Network TV is still the single most effective mass advertising buy in
television. Without the stations, there is no network."
If compensation were completely eliminated, a
network would not be different from any other program supplier. Stations
would be free to negotiate the best deal. Instead of airing a Peter Jennings
newscast, a station might have its choice of a half dozen national newscasts
offered by other networks or some new entrepreneur such as the Associated
In May, CBS shocked its affiliates by announcing
a radical plan that would continue compensation but would make the stations
pay outright for airing network programs. The higher the national ratings
of the program, the more the stations would pay, depending on their market
In effect, CBS wanted to give with one hand and
take away with another. Its affiliates, however, didn't go for it. The
network quickly backed off but immediately instituted another cut in compensation,
a percentage that matched what each station would have been charged in
the earlier plan.
Angry CBS affiliates have been meeting to discuss
their options. They've even considered buying programs from syndicators
to replace CBS fare, including newscasts. ABC and NBC station executives
are warily monitoring the CBS squabble because they know the outcome could
affect them, too.
"ABC made a couple of adjustments earlier and
CBS is now bringing its total compensation roughly in line to the total
that ABC is paying," says KOAT's Godsey. "But what disturbs many of us
is that the networks are moving unilaterally. Reasonable and honest dialogue
is not taking place."
Some affiliates sympathize with the networks and
are willing to try something new as long as neither side is hurt. But some
wonder if preemptions might accelerate if the networks continue to tinker
with the present compensation system.
"I think you'd see a good surge in local programming,"
says Tom Bier, news director at WISC, the CBS affiliate in Madison, Wisconsin.
"You wouldn't be as apprehensive about bumping a low-rated network show
for a local news or information program that would help your community
image and make money, too. Any good news department is going to take advantage
The network-affiliate relationship works best
when it is an equal partnership. For years, the networks had the upper
hand. In the 1980s, satellite technology helped to equalize the payoffs.
Now, the compensation battle threatens to dissolve the partnership.
"We seem to be playing a game of chicken with
each other," says Godsey. "If we don't watch out, we're going to kill the