CBS affiliates’ OTT deal monetized on per-subscriber basis, but ad revenue possible

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CBS affiliates’ new OTT deal with the broadcaster, which will expand local broadcast content access on Hulu’s live TV and YouTube TV, is currently being monetized based on the number of subscribers.

Chris Cornelius, chairman of the CBS Affiliates Board and vice president of business development for Morgan Murphy Media, said the affiliates negotiated a per-subscriber rate for OTT services including Hulu and YouTube TV. It’s a base rate, one that will increase over the next three years depending on certain tiers of subscriber growth.

The deal for CBS All Access was separate from the other OTT deals, but it was also negotiated on a per-subscriber basis that’s set to escalate over the next two to three years.

The Hulu and YouTube deal is struck through 2020 and the All Access deal is through August 2019.

Though at this point the CBS affiliate agreement is a distribution revenue play, Cornelius said there are options in the future relating to the potential of monetizing local content through DAI (dynamic ad insertion) and programmatic.

“We’re not there yet [but] the conversations have started,” said Cornelius, adding that more distribution will boost ratings measurements by Nielsen and ComScore, and more viewers will translate to higher ad rates.

RELATED: CBS to expand availability of local station affiliates on Hulu live TV, YouTube TV

Cornelius’s comments clarify somewhat the announcement made earlier this week about the agreement between CBS and the CBS Affiliates Board. In a statement, CBS described the deal as having “additional revenue possibilities for all,” though it didn’t specify if those benefits were related to distribution or advertising.

The new deal—which is similar to recent affiliate agreements announced by ABC and NBC—covers continued participation in CBS All Access and extends opportunities for local broadcasters to participate in virtual MVPDs like Hulu’s live TV, Google's YouTube TV and “future new entrants.”

Beyond the increased distribution and distribution revenue, Cornelius said broadcasters will benefit from the added exposure that comes with being carried on two of the more high-profile virtual MVPDs. He said that Hulu’s and YouTube’s user bases in particular are non-traditional MVPD subscribers.

“I think our content has the possibility of reaching a whole new millennial subscriber [who] has a real interest in local television but has never really had the exposure to local TV,” Cornelius said.

“For so long there’s been this sense that the local affiliate model is dying. But what we’ve learned through these negotiations, is that the value of the local affiliate to these bundles is extraordinary,” he added.