Retrans Costs to Keep Rising, Cable and Broadcast Officials Agree
Retransmission consent costs will keep rising in coming years, agreed broadcast and cable industry officials and an analyst who tracks those prices. On opposite sides of whether the FCC should change retrans rules, the industry officials said neither the commission nor legislators seem poised to step in. The number of recent retrans disputes in terms of multichannel video programming distributor subscribers blacked out from getting a TV station on their MVPD has been small and the duration of outages has been short, said the broadcast lawyer and the analyst. The cable executive said the sheer number of disputes has been high, even if they've been in smaller markets.
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Cable, DBS and telco-TV providers will pay broadcasters $1.46 billion this year to carry their stations, 28 percent more than 2010, predicted SNL Kagan, organizer of a Tuesday webcast on the topic. The pay-TV research firm predicted retrans costs will more than double to $3.61 billion in 2017, and noted that 67 percent of last year’s fees went to stations in the 25 largest markets. Sinclair got 20 percent of revenue from such payments in Q2, or 46 cents monthly per MVPD subscriber, the most of any TV station owner tracked by SNL Kagan. The Big Four broadcast networks will get $827 million in 2012 retrans revenue from the stations they own, with News Corp. getting the most at $308 million.
There were 10 blackouts of TV stations on MVPDs in the 13 months through Sept. 19, SNL Kagan said: They involved 4.8 million subscribers and 55 stations. The ongoing retrans blackout between LIN Media and Mediacom involves 102,564 subscribers, the research firm estimated. “There really were not that many blackouts” in the past year or so, said analyst Robin Flynn. “Dish is the name that shows up here the most -- in terms of disputes that could not be resolved before the station was pulled. Dish had four disputes, including one with LIN, over a total of 33 stations that affected 1.3 million subscribers, the research firm estimated. Time Warner Cable and Mediacom each had two disputes, and DirecTV and Cablevision one apiece.
Pay TV has been the “rare instance” where more competition has “actually driven up consumer prices,” said Vice President Thomas Larsen of Mediacom, whose company wants retrans rules changed. “Pay-TV subscribers’ prices are rising significantly faster than inflation,” and he thinks a la carte for expensive programming (CD Oct 7 p9) “has political traction on both sides of the aisle.” Rising programming costs “hits more programming than just broadcast” shows, Larsen said. Mediacom pays about $2.50 to programmers for each dollar the cable operator gets from rate increases and equipment surcharges, “and that’s not sustainable,” Larsen said. The company has lost about 160,000 video subscribers in the past three years, and “at this rate we'll have more broadband subscribers than video subscribers in just a few short years,” he continued. The company, which began selling broadband about 10 years ago, had 1.6 million video subscribers at its peak in 2011 and started selling cable in 1996, he told us.
Retrans now accounts for about 0.6 percent of total TV distribution revenue, estimated broadcast lawyer John Hane of Pillsbury Winthrop. “If you listen to the claims of MVPDs, you'd think rising retrans fees are turning TV distribution on its head,” but retrans is “one of a dozen of transactions that take place on a daily basis,” he said. “It may be a market in transition, but it’s not a national policy issue,” he said: “There’s been a lot of rhetoric around retransmission consent, and I think a lot of it is overheated … even by Washington standards.” The “rates are rising, and I expect them to continue to rise,” with the revenue “normalizing” at 2-4 percent of “the entire TV distribution marketplace -- it’s really not a big deal.”
It seems “clear” that the FCC thinks it lacks legislative authority to adopt further retrans rules, Flynn said, citing agency officials’ comments. “I just don’t believe that there’s the will to act there yet,” though the agency could look to see if there’s “something they can do to facilitate the process, at least in terms of negotiations,” she continued. If Chairman Julius Genachowski wanted to act, “there is plenty of legislative language” and commission precedent to do so, Larsen said. Under Genachowski and predecessor Kevin Martin, the FCC has “taken a narrow view” of interpreting the Communications Act in terms of retrans, Larsen said. A slide Hane showed during the webinar said the FCC “knows it lacks Congressional authority to regulate rates, directly or indirectly.” Even if the agency had authority, it probably wouldn’t act, because of the dearth of complaints that good-faith retrans negotiating rules have been broken, Hane said: “The FCC is grappling with big issues” like Universal Service Fund reform and starting a national wireless broadband network for police and firefighters, he noted.