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A Closer Look At How DirecTV Wants To Fix ‘Broken’ TV Model

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DirecTV Stream Fire TV Integration

A dispute between DirecTV and Tegna took a turn for the worse last night, resulting in the loss of a number of local stations in various markets for DirecTV, DirecTV Stream and U-verse. Along with issuing a statement on the dispute, DirecTV also revealed it offered Tegna a “first-of-its-kind a la carte model.” DirecTV also provided information on what this model would include, and how it is designed to fix the existing “broken model.”

The crux of DirecTV’s assertion that the current model is broken is how broadcasters are taking advantage of “an antiquated legal framework” to strike deals at higher prices for content that is available for free over-the-air. DirecTV doesn’t hold back on this point, arguing “broadcasters seek to inflict maximum customer pain by weaponizing blackouts to force higher fee increases on distributors.”

Its proposed fix, which takes control away from broadcasters and puts it back in the hands of consumers, is a “Pay TV a la carte model.” Something DirecTV argues would eventually lead to the stabilization of prices and a reduction in the number of blackouts that customers experience.

How DirecTV’s a la carte model would work

Essentially, DirecTV’s proposed model would completely remove the need for DirecTV to negotiate directly with broadcasters. While it would still negotiate deals for national network fees for ABC, CBS, FOX and NBC, broadcasters would be able to set their own prices uncontested by DirecTV.

In principle, this would eliminate the blackout situation, as there would be no disagreement on price. Broadcasters could determine what they feel are fair prices and those would then be the prices for access to their stations.

In this proposed model, DirecTV customers wouldn’t have access to any of these stations through their live TV package by default. Instead, consumers would have the option of personalizing their subscription by adding the stations – much like add-ons are already used for premium networks.

All of this would ultimately result in a situation where:

  • Broadcasters get the fees they want
  • Customers wanting access to these stations could opt in to them at a premium
  • Customers that don’t want the stations wouldn’t end up paying for them

Sounds fair, so what’s the problem?

That’s the big question. If DirecTV is to be believed, then the issue is the level of control that broadcasters would lose. Taking Tegna as an example, DirecTV argues Tegna uses blackout as a leveraging tactic to ensure it is able to secure deals at higher prices.

Tegna’s negotiation playbook relies on blackouts during peak football season viewership to gain leverage; major disputes with 5 key distributors over the last three years, all during football.”

DirecTV on Tegna’s approach to renewals

While aimed at Tegna on this occasion, this is actually an accusation that has routinely been made by live TV providers during disputes with broadcasters. For example, Dish Network made the same argument during its dispute With Hearst Television, also referring to the current setup as a “broken system” where “programmers continue to hold distributors hostage.”

From the local broadcaster point of view, and irrespective of any alleged power-play moves, such a deal just might not be good business. In fact, deals like this probably wouldn’t be good for any channel owner, local or national, as the whole point of doing deals with providers is gaining access to the provider’s entire subscriber base.

If a channel or collection of channels were offered a la carte, it stands to reason that some subscribers would opt out of those channels, especially if the savings are noteworthy enough. The possibility of losing even some subscribers seems unlikely to be a gamble any channel or station owner would actively want to take.

Changes seem unlikely, for now

With Tegna already reportedly having declined DirecTV’s a la carte offer, it seems unlikely anything major will change anytime soon.

Instead, the current dispute seems likely to just play out in a similar way to every other dispute before it. In other words, a deal will eventually be agreed and we won’t know the finer details (including which side ultimately caved), or the channels will continue to remain unavailable to subscribers.

John Finn

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