Policy

ACA Frets Retransmission-Consent Talks

8/02/2004 9:08 AM Eastern

Orlando, Fla. -- The American Cable Association warned its members Monday that broadcasters will press for “cash for carriage” during the next round of retransmission-consent negotiations, with The Walt Disney Co. already claiming that its ABC stations would essentially be a bargain at a 75-cent monthly license fee.

During the ACA’s meeting here, the lobbying group’s counsel, Chris Cinnamon, said the first stages of the next round of retransmission consent will kick off in “14 short months” -- an opportunity that media companies have “turned into bonanza for their corporations,” and they now have a chance to get cash compensation for their TV stations.

Cinnamon basically told small cable operators to be poised for the battle ahead and suggested that “it pays to shop” around and consider carrying out-of-market TV stations if their in-market broadcasters try to extract cash from them.

Talking about the upcoming retransmission-consent negotiations, he said, “We have a lot of signals that the next round could be a lot about cash. In addition to tying [retransmission consent and carrying a media company’s cable networks], it could be a lot about cash … We’re seeing an increasing amount of positioning for cash for carriage.”

Cinnamon cited testimony by Ben Pyne, executive vice president of affiliate sales and marketing for Disney and ESPN, who spoke before a House Telecommunications Subcommittee on programming last month.

Pyne said Disney always provides cable operators with a cash alternative, in the range of license fees of 70-80 cents per month for ABC stations, Cinnamon said.

Disney had a study done that showed that the market value of ABC’s broadcast signal was more in the range of $2 per month, per subscriber, Pyne testified, adding “but we’ll let t [operators] have it for 75 cents per month if they don’t want to carry our affiliated programming,” according to the account Cinnamon gave at the ACA meeting.

If all of the “Big Four” broadcasters were to seek cash license fees of 75 cents for their TV stations, that would amount to $1.1 billion on a base of 10 million subscribers for a three-year retransmission-consent pact, which approximates the membership of the ACA and the National Cable Television Cooperative, the latter of which is also holding its meeting here this week.

“That’s $1.1 billion that the networks are looking to extract from the small-cable sector,” Cinnamon said. “That scares me.”

The ACA “is working on some answers both at the FCC [Federal Communications Commission] and Capitol Hill,” according to Cinnamon.

Pyne will have a chance to present his case Tuesday when he appears at a programmer roundtable at the NCTC’s meeting.

During the ACA session, Terry Reynolds, president of 700-subscriber Reynolds Cable Inc. just north of Macon, Ga., described how WMAZ, a CBS affiliate, came to him and several other small systems asking for a $1 monthly license fee.

Reynolds said he wrote his subscribers a letter and asked if they wanted to pay that $1, even though over-the-air TV viewers and Cox Communications Inc.’s nearby 70,000-subscriber system weren’t being charged for the station.

“Most of my customers wrote back and said, ‘Hey, we’re with you. Tell WMAZ to stick it, we don’t need their signal,’” Reynolds said.

So Reynolds Cable and two other tiny operators in that market all pulled the plug on WMAZ Jan. 1, 2003, and started carrying the out-of-market CBS station from Atlanta. Reynolds added that WMAZ backed down on its $1 fee demand, but he didn’t put it back on his lineup until six months later, in July 2003.

“It pays to shop,” Cinnamon said, referring to operators going out-of-market for stations where they can in markets that have exceptions to network-nonduplication rules.

However, some broadcasters are wising up to that tactic by operators and are trying to combat it.

For example, in a case that came out of the FCC last week, a small operator refused to pay cash to a Gannett Co. Inc. station in Georgia and signed a retransmission-consent agreement with an NBC out-of-market broadcaster instead.

That out-of-market station then claimed that NBC tried to put the kibosh on that arrangement, saying that it violated the station’s affiliate’s agreement with the “Peacock” network by granting retransmission consent outside of its DMA, according to Cinnamon.

Ultimately, in that case, the FCC said the operator could continue to carry that particular out-of-market signal, Cinnamon said.

Peter Smith, senior VP of programming and product development for Millennium Digital Media in St. Louis, told the group local broadcasters were trying to coordinate their efforts “to not allow us to carry out-of-market signals -- they’re bringing a lot of pressure on one another, they’re also bringing pressure on networks … they’re trying to close that door.”

Said Cinnamon, “Rest assured, the broadcasters and network owners are going to be looking to work even harder to restrict out-of-market carriage.”

September