Thirty-three diverse entities joined forces last week to form the American Television Alliance for the purpose of combating the deteriorating conditions and skyrocketing cost of retransmission consent between broadcast TV stations and video distributors. The diverse group includes large and small cable operators (including Insight), both major satellite providers and the two major telephone companies who are offering video products. In addition, independent cable networks and public advocacy groups have joined as well, in an unusual alliance created because of the escalating conflicts between distributors and consumers on one side and broadcast station owners on the other.
What is retransmission consent?
Broadcasters were given broad distribution rights on cable systems nearly 20 years ago (and later expanded to satellite and phone companies) when Congress passed the 1992 Cable Act. In addition to having the free use of the public airwaves to air their programs, TV stations have the right to either negotiate economic terms for their carriage on a distribution network or to declare must-carry forcing distributors to carry their signals. It's a win-win for broadcasters.
The original idea was to ensure that consumers would always have access to the local news and information content that local TV stations provided. However, today, the big media conglomerates which own most of the major broadcast networks are demanding larger and larger cuts of the retransmission consent fees from their local affiliates who receive the payments from distributors. As a result, the intent of Congress to protect local news and information has been compromised and the cost of providing video service to consumers is rising at an alarming rate.
Hey, what happened to the Academy Awards?
With more of the money going to the big media companies, local TV stations are demanding huge increases in the amount they charge for their carriage. When distributors balk at the unprecedented increases, some station owners hold consumers hostage by threatening to pull their programming off of the cable or satellite system. Every now and then, they make good on their threat as was the case for Cablevision's customers in New York on the day of the Academy Awards when ABC pulled their signal for most of that day. The companies finally reached an agreement but the first 15 or 20 minutes of the popular awards show was not aired in Cablevision homes.
Distributors who face increases of 50, 75, or even 100% are increasingly saying no. The brinkmanship is causing more and more disruption in the market as consumers are whipsawed by the very ugly public fights and the threat of losing access to one of their TV channels.
What's the plan?
The ATVA hopes to bring a change to the current atmosphere surrounding retransmission consent negotiations. Here's their mission statement;
I, for one, do not dispute that local TV stations have the right to responsibly negotiate the terms for carriage on a cable system. However, the playing field on which we are negotiating is flawed. Broadcasters are allowed to have monopoly power over big events like the Academy Awards, the Super Bowl, March Madness, and countless other major attractions. But if a local TV station demands unprecedented payments, we have no other way to receive those big events because the broadcaster enjoys market exclusivity for those events.
Why not just pay them? After all, we pay for cable networks.
I have heard broadcasters say cable and satellite companies have very healthy increases in revenues and cash flow, so why shouldn't we just pay and swallow it? What they don't tell you is that all of our growth is coming from the other businesses we heavily invested in and developed over the past ten years -- broadband and phone. While more and more customers are signing up for our new, attractively priced digital telecommunications services, our video business is deteriorating rapidly. As a result some operators are suggesting that consumers be given the right to pick and choose the individual stations that they want to receive. That way, consumers will drive the pricing power of network owners instead of the other way around. Problem is, the big media companies that own the vast majority of networks, both broadcast and cable, won't permit that type of distribution.
Let's hope the ATVA can find a better way. Whether it's a-la-carte, binding arbitration, or a standard fee set by a governmental authority and collected by the cable, phone and satellite companies, there has to be a way to avoid this madness whenever a renewal comes up.