If broadcast affiliates had their way, they would be just like Netflix, only better. Via direct-to-consumer over-the-top offerings, they would beam their station signals far and wide, just like they do on regular TV—live, linear and, most enticing of all, free.

“We want to provide all our programming—our locally produced programming, our networking programming and our syndicated programming—to our consumers, who want to see that programming on any device whatsoever,” says Jeff Rosser, a Raycom Media VP who chairs the Fox Affiliates Board. “That’s what our customers want, and we want to be responsive to what they desire.” The data trends back him up—59% of pay-TV homes in the U.S. also have a subscription to Netflix, Amazon or Hulu, a Leichtman Research Group study found in July, up from 47% in 2014. In cord-free homes, the number jumps to 70%.

Consumers’ hunger to get TV content in ways beyond the traditional bundle is now an absolute. Sating that hunger, for affiliates, has proven to be a mind-bendingly complicated task. Against a backdrop of restless experimentation—networks launching stand-alone OTTs, skinny bundles proliferating, and consumers enjoying a Las Vegasstyle buffet of choices—affiliates’ plans to light up live local TV on their own digital platforms remain stymied. Technology is no longer an obstacle—instead, the holdup is simple economics, operational mechanics and industry politics.

About two-and-a-half years since the idea of putting free TV over-the-top first hatched, TV stations and the networks whose programming they air are still hashing out issues from distribution rights and business models to who should be in charge of bringing the idea to fruition. That last point is perhaps the biggest impediment of all. “The networks are trying to control negotiations with OTT,” says Preston Padden, a media consultant and former top Disney and Fox executive. “This can be a cause of tension between the networks and affiliates and a cause of frustration for new OTT players who want to pay for rights but are caught in the crossfire between networks and affiliates.”

Hovering over the epic push and pull of negotiations is the stark reality that nobody really knows what is at stake with OTT—or how it’s going to morph and grow. Stakeholders engaged in the talks are playing an elaborate game of Texas Hold ’Em, hoping to see the cards they want when the dealer flips them over.

Given how admirably many station groups have performed in recent years despite considerable headwinds, and the function they serve in communities faced with the retreat of newspapers, it’s entirely possible that going OTT could be the ultimate energy shot. Mindful of this success scenario, networks and local broadcasters each want to make sure any agreement they reach positions them for a big payoff.

Ramping Up

For all of the fascination with OTT as an idea, the actual audience consuming it is very modest in size, at least for stations. Whereas broadcast TV is delivered to roughly 99.44 million pay-TV households, according to the latest figures from Nielsen, industry sources estimate that viewership via alternative digital means adds up to maybe 1% of that, at most.

“The biggest stumbling block is that this is all new for everyone,” says Graham Media president and CEO Emily Barr, who chairs the ABC Affiliates Board. “When you go into negotiating these days, you are a bit blind because you don’t know what is going to be. For that reason, everyone is treading carefully.

“It is not a speedy process,” she says.

Owned-and-operated stations, as vertically aligned assets of the broadcast networks, are immune from most of the issues and have been able to be featured in some digital offerings like CBS All-Access or Watch ABC. But many of the 800-plus ABC, CBS, Fox and NBC affiliates consider having control of the process as the only way OTT will ever actually happen.

Station groups want to drive their own carriage deals with digital platforms (Roku, Google Chromecast, Microsoft Xbox, etc.), much in the same way they have done with multichannel video programming distributors (MVPDs) since the early ’90s. Under that model, station groups are the hands-on negotiators with cable and satellite services, working on behalf of their affiliates as well as the networks.

In exchange for selling their signals to subscribers, MVPDs pay local broadcasters a portion of that money in the form of retransmission consent fees. Station groups, in turn, fork over a cut of that cash—roughly 50%—to the networks as part of their affiliate agreements.

Because OTT distributors are not considered MVPDs (the FCC has yet to legally categorize them as such), ABC, CBS, Fox and NBC see the emergence of OTT as their chance to control what they can’t in the MVPD world. And there could be big money at stake in that battle for control.

Early ventures indicate that networks favor the idea of offering live local feeds as part of subscriptions, skinny bundles or network-driven offerings like CBS All Access, a subscription video-on-demand service costing $5.99 a month. That, however, doesn’t match the goal of many affiliates, which at this early stage are less concerned with getting a payout than getting their signals in front of, say, that Apple TV fan in Rockford, Ill., or a Seattle gamer more likely to flip on an Xbox than TV set.

That’s also what differentiates affiliates’ plans from TV Everywhere initiatives launched by pay-TV services as well as each of the networks, which offer live local to consumers who have to authenticate their MVPD subscriptions before tuning in. Watch ABC, an ambitious digital offering that features programming from many Hearst stations alongside Scandal and Shark Tank, can only be viewed by pay-TV subscribers.

CBS has made the most headway in this arena, striking agreements that give affiliates the option of offering their live signals to Sony PlayStation Vue subscribers as well as via CBS All Access. (Though in the latter, it took a lot of cajoling of stations over the course of many months.)

Under CBS’ agreement with Vue, which has wanted to offer live local from the get-go, affiliates can distribute their signal via the platform in exchange for a cut of the money CBS gets from Sony, according to CBS television networks distribution president Ray Hopkins. Sinclair, Raycom, Meredith and Gray-owned stations, which together cover roughly half the country when combined with the CBS O&Os, have already have opted in, Hopkins says. CBS stations covering an additional 25% of U.S. households are expected to roll out in 2017, he says.

Affiliates also opt to make their linear feeds available via CBS All Access, the network’s subscription-based OTT service, which offers the network’s library on-demand and will debut originals, such as a new Star Trek series, in 2017. The upside for affiliates, Hopkins says, is they retain all their own ad inventory in addition to “the economic deal to share in the growth of CBS All Access.” CBS now says close to 100% of its affiliates are on board.

“I think we’ve established the model,” Hopkins says. “The discussion has already taken place between us and the CBS affiliates, and I think everyone is very clear this is how we are going to proceed together—and thus far it has been successful.” Indeed, CBS Corp. CEO Leslie Moonves raised eyebrows on Wall Street when he announced in July that total subscriptions for Showtime’s stand-alone SVOD and CBS All Access had surpassed 2 million, evenly split between the two. He says he was “confident” the company would hit its target of 8 million OTT subscriptions by 2020, which the company estimates will bring in $800 million in new revenue.

Morgan Murphy Media’s Chris Cornelius says the CBS Affiliates Board he chairs approved the OTT arrangement because, when it comes down to it, the board views it as basically fair.

“But it’s not the end-all, it’s not the be-all and it is not necessarily a way the affiliate body would like to handle this,” he says. “Affiliates would prefer to negotiate our own deals like we do with traditional MVPDs, but we simply don’t have the rights,” he says. Plus, he adds, “there is no incentive” for networks to give ground on the issue.

On-Demand vs. Fully Live

Despite the perceived upside of taking the lead in carriage deals, it is possible that the networks could be pushing for a system that may have some inherent flaws. Over the years, Fox and NBC both proposed assuming responsibility for negotiating with MVPDs, but the idea didn’t fly because it turned out to be fraught.

Negotiating on behalf of 200-plus affiliates per network, and their myriad owners, would be exceedingly complex. In addition, network-negotiated carriage deals wouldn’t necessarily cover broadcast groups’ other assets, like digital subchannels, that need distribution, too.

“It’s more complex than just a network feed,” says Jack Goodman, a Washington-based lawyer who represents broadcasters. “And those problems might continue to exist in an OTT environment. We just don’t know yet.”

None of which means local TV has been sitting out the great OTT land grab while they and other stakeholders across the industry try to figure all this stuff out. Quite the contrary, in fact. Over the last few years, local broadcasters, sensing the existential threat, have launched a wide range of over-the-top offerings featuring the content they produce. They have been able to aggressively pursue a multiplatform approach with the news, public affairs and other programming that they actually own.

Leveraging websites, station-branded apps and, most recently, Roku, TV stations are offering newscasts live and on-demand, crowdsourcing weather, and covering high school sports. They are producing digital-exclusive programs and podcasts, some of which have little to do with what they show on traditional air.

Looking for maximum exposure, station groups are also partnering with others, including the free news aggregator NewsOn. The app, which resulted from a lengthy quest to build a consortium of station groups, lets users watch local TV newscasts from around the country and several different groups regardless of their geographic location or subscription/pay-TV status.

Similarly, Sean McLaughlin, E.W. Scripps VP of news, believes local programming should be the focus of TV stations’ efforts—more of an on-demand model than a fully live, always-on stream. Accordingly, he says Scripps has no plans to venture into live linear streams anytime soon.

“To just put a broadcast in that space is probably not maximizing the opportunity,” says McLaughlin, adding he’d “be surprised” if affiliates are even able to strike all the agreements—with syndicators, sports franchises and advertisers on top of the networks—necessary to make that happen the way they envision.

Instead, McLaughlin says he has been focusing Scripps’ digital efforts, including a recently launched suite of station-branded Roku channels, on “getting our dominant brands in our local markets into that space.”

Although the channels’ early offerings are somewhat basic—local newscasts live and on-demand, and a news wheel—they are garnering viewers, he says. Consumers spend an average of 18 to 25 minutes with the Scripps channels, McLaughlin says. “We feel pretty encouraged by that.”

Interestingly, that exact same notion of the potency of local content is also the centerpiece of affiliate leaders’ efforts to reach the OTT promised land. “The local programming, particularly local news, has an incredible value and we want to bring that to the table,” says Quincy Newspapers president and CEO Ralph Oakley, chairman of the NBC Affiliates Board. “It’s a big part of what people want no matter what type of delivery.”

Network execs across the industry feel likewise. “ABC has made it clear to us that they want the local/national mix as part of the OTT ecosystem that they are looking to get into,” says Barr, adding affiliates and the network are getting “closer” to resolving the issues.

“Having said that,” she says, “we don’t have a deal yet.”

LOCAL BEYOND LINEAR: A VIEWER’S GUIDE

TV stations still can’t send their full live signals OTT, but they are pushing out their local video content across a range of new platforms. Here are some of the places viewers can watch local TV in non-traditional ways:

STATION-RUN WEBSITES AND APPS: Most stations deliver their own content via the web and mobile apps, streaming live newscasts and offering many segments on-demand.

THIRD-PARTY APPS: Aggregators such as NewsOn and Watchup air local news, live and on-demand, from stations around the country.

BROADCAST NETWORK APPS: Pay-TV subscribers get access to live local TV through Big Four network apps. CBS’ $5.99-a-month subscription service, All Access, provides linear streams as well.

DIGITAL DISTRIBUTION PLATFORMS: TV stations are rolling out their own Roku channels. CBS affiliates are launching on PlayStation Vue.

SOCIAL PLATFORMS: Affiliates are using Facebook Live, Periscope and Google Hangouts to supplement their main on-air offerings.