AT&T’s current carriage dispute with Nexstar Media came along shortly after the company made a hefty investment in free TV streaming service Locast, which one analyst said was a good idea by AT&T.
BTIG analyst Rich Greenfield pointed out that lack of overlap between the markets that Nexstar and Locast serve means the donation and integration of Locast on DirecTV and U-verse TV platforms doesn’t make a huge difference in this dispute. But the $500,000 that AT&T recently poured into Locast will lead to market expansion for the service and could likely impact future broadcast retransmission consent fee negotiations.
“We believe donating to Locast is the single smartest move any MVPD/vMVPD can make today, as it offers the potential to slow or even reverse the surging retrans costs that are crushing the price/value equation of the multichannel bundle. Hopefully, others will follow AT&T’s lead (beyond Comcast, which is conflicted by its NBC ownership),” Greenfield wrote in a research note.
Greenfield said that Locast probably won’t end the need for AT&T to pay retrans cost, but that having an easy solution to offer subscribers access to blacked-out channels on their existing set-top boxes could “meaningfully shift/balance negotiating leverage (carriage disputes usually end when an MVPD simply cannot take the pain from subscriber losses any longer, but with Locast access on existing set-tops, the odds of losing subscribers likely goes way down).”
Since cost is the most commonly cited reason for cord cutting and DirecTV has been hit the hardest in terms of subscriber losses, it makes sense that AT&T would invest in an alternative that could potentially both mitigate programming cost increases and appease subscribers during carriage disputes.
For right now, though, Locast is limited in its reach as means for receiving broadcast television signals. The service is currently available to more than 32 million users in 13 cities – New York, Chicago, Los Angeles, San Francisco, Philadelphia, Dallas, Washington, Houston, Boston, Denver, Baltimore, and Rapid City and Sioux Falls in South Dakota. The company said it reaches nearly a third of all U.S. TV homes.
For Locast, which relies on a statute within the Copyright Act that allows a non-profit organization to retransmit local broadcast signals without paying licensing fees, the donation from AT&T should help cover operational costs and drive expansion.
“...Our biggest obstacle is funding,” said David Goodfriend, chairman of Sports Fans Coalition NY, in a statement. “Locast is asking each user to contribute $5 per month, which the organization said would make it fully sustainable and capable of reaching all 210 U.S. television markets.”