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ABC Sets Digital MVPD Pacts for 160-Plus Affiliates Through Clearinghouse Initiative (EXCLUSIVE)

Variety logo Variety 4/24/2017 Cynthia Littleton
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ABC is now in the fast lane when it comes to getting affiliate stations on board with emerging digital MVPDs.

The network has enlisted more than 160 of its 200 affiliate stations to join the ABC Clearinghouse initiative unveiled last year at the National Assn. of Broadcasters’ convention in Las Vegas. ABC offered its affils the chance to opt-in to a uniform carriage deal template negotiated by network executives in an effort to ensure that the network has a robust presence on emerging platforms.

As NAB begins again this week, ABC said it has marshaled more than two-thirds of its affiliates, plus the eight ABC O&Os, for live streaming carriage pacts with DirecTV Now, Sony PlayStation Vue, YouTube TV and CenturyLink. There are more deals to come with the soon-to-be-unveiled service from Hulu and other nascent ventures. Amazon, for one, is known to be pursuing a skinny-bundle streaming channel package that would include local broadcast affiliates of the Big Four networks.

“Our goal was to pioneer a creative distribution solution that reaches ABC viewers in as many markets as possible,” Ben Sherwood, Disney-ABC Television Group president, told Variety. “More people will be watching more of our programming on more devices because of these deals. We want to be everywhere our viewers are. The enthusiastic response to this is a win for our affiliates, our distributors, our network and our studio.”

As part of the Clearinghouse process, ABC was able to galvanize affiliates to expand the availability in local markets of authenticated on-demand access to ABC programming via the ABC app and TV Everywhere services offered by traditional MVPDs as well as digital upstarts. ABC said the network’s on-demand footprint has expanded to 90% of U.S. TV households.

John Rouse, ABC’s exec VP of affiliate relations, said the Clearinghouse initiative was a good opportunity to strengthen the network’s business relationship with its affiliates by moving together into a new distribution realm.

“The local-national partnership is the best way for us to reach consumers across the nation,” Rouse told Variety. “Affiliates see that [streaming] is a growing market and something that viewers are responding to. We’re seeing that already in our owned stations.”

ABC is also working on a turnkey technological service that will make it easier for affiliates to deliver their signals to various digital platforms. The technological infrastructure needed to deliver local stations into specific markets is quite sophisticated, Rouse said. Disney is investing in technology designed to allow affiliates to use one system to deliver signals to multiple platforms at the same time.

The Clearinghouse offer was attractive to affiliate owners because it allowed them the flexibility to opt in to ABC’s template on a case-by-case basis depending on the distributor. Even ABC’s largest affiliate groups — Sinclair Broadcast Group and Scripps Co. — saw the benefit of going through Clearinghouse to streamline the process that would have otherwise required multiple negotiations. ABC brought the market clout of Disney to its negotiations with distributors, plus the promise that numerous ABC affiliates would also sign on. Hearst Television and Tegna Media are among the sizable ABC affiliate owners also on board.

ABC had discussions for months with its affiliate owners on how to best hammer out the Clearinghouse agreements to serve the needs of the network and local stations. NBC earlier this month announced a similar opt-in program for its 200-plus affiliates.

“We spent a lot of time discussing how to construct this,” Emily Barr, chairman of ABC’s Affiliate Board of Governors and president-CEO of Graham Media Group, told Variety. The flexibility to opt-in on a deal-by-deal basis was key.

Barr said ABC’s forward-looking effort helped emphasize the importance of the local-national business model of the major broadcast networks.

“We’re most excited that [distributors] have discovered that having a local TV station for the average person is absolutely critical for any [channel] package,” she said. “We bring a lot of value, not just because we’re affiliated with ABC but because of our local news and community programming.”

Clearinghouse benefits ABC by ensuring that the network’s programming will be widely available on new platforms. ABC also gets a cut of affiliate distribution revenue in the form of reverse compensation that most Big Four network affiliates fork over to help pay for high-priced sports and entertainment programming. That means ABC and other networks have an interest in making sure affiliates cut deals with emerging distributors.

The pacts are said to be structured similar to traditional retransmission consent license fees that are determined by the number of subscribers a service has in a given market, rather than a revenue-sharing arrangement. Barr said the time frame of the deals were “not exceptionally long” to give stations the chance to revisit the contracts sooner rather than later as the market develops.

CBS has most of its affiliates on board as partners in its CBS All Access SVOD service and is looking to take a similar steps with outside distributors. Fox is believed to be moving in the same direction.

“There are efforts being made by all the networks to thread this needle,” Barr said. “This is a great opportunity for affiliates to work closely with our networks and [MVPDs] to provide viewers with more choices. It will be interesting to see what happens with consumer behavior. Time will tell how people use these services.”

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