Retrans Wars That Nobody Wins

The news in our industry seems to continue at a healthy pace, but we’ve started to see the disputes between the local “off-airs” (CBS, NBC, etc.) and the companies that deliver (retransmit) these services, such as Charter Communications and DirecTV, dominate the headlines. It seems like every week there is a different cable or satellite company being asked to pay more and more in order to keep the local channels live to their subscribers. The burning question is why has this been turned into a battleground where the biggest loser would appear to be the consumer.

Stuart Smitherman

Stuart Smitherman

One of the things that most people in our industry like is a joined-up strategy where we can all feel as though we are rowing the boat in the same direction. The reality is that the media networks and cable companies are rowing in different directions, causing the boat to cruise headlong into an iceberg at an alarming rate. Meanwhile, some of the cable and network executives are on the top deck rearranging the chairs.

I have been contemplating this ever-changing situation for years, and I feel that every time I think I have an answer a new curveball is thrown into the arena. Ten years ago it would cost a cable company next to nothing to retransmit CBS, NBC, ABC, etc. to their subscribers. In fact, it was a highly profitable part of their business.

Ever-Changing Reasons

The reasons networks have thrown out for each massive increase on the cost of these “free-to-air channels” represent a long and growing list. (And is it just me, or do we think we should change the name because “free to air” is not a very good adjective to describe this group of channels anymore? How about a change to most expensive to air locals that are not really local? OK, I guess it does not have the same ring to it.)

Rather than go through every single reason that has been given, let’s highlight just a few that I am not sure about:

• The cost of making programming has gone up.
• Sports rights are costing so much, we have to pass on that cost.
• Advertising revenue has gone down.
• Cost of sports events has gone up again.
• Cost of sports events has gone up again and I have nobody that wants to advertise and sports rights have gone up.
• Blah, blah, blah.

Let’s start with No. 1. Seriously? It now costs more money to make reality TV shows than it costs to make award winning documentaries, dramas, comedies et al.?

The cost of making reality TV is very low compared to the other genres and yet we are seeing more and more reality TV on during primetime than ever before. Before y’all think I hate reality TV, OK I do, but my personal viewing preferences have nothing do with it.

Then, there’s No. 2: Sports rights are too much. For sure, there was a period when you could watch a ton of sports on the local channels that was relevant to you. For many, it was the only way they would be able to watch their baseball or basketball or hockey teams, but that world changed a long time ago and the regional sports networks have done a good job of vacuuming up as many of these rights as possible.

That leaves national sports rights, and the vast majority of sports except for golf are cable networks, not the locals, so how does the cost of sporting events that you don’t show mean an increase? So, we’re going to see a decrease, right? Nope — and you forgot No. 3.

I thought I had that covered in the above, but probably not — so here we go. If you are not making programming that companies want to advertise on and then you change your strategy to offer consumers ways to watch your content without advertising, what message is being sent? Then, just to add some confusion, some of the broadcasters are now owned by the very cable/satellite companies that they were constantly at war with. Maybe we will see these companies reduce the prices of the cable package.

Big Tech Lurks

It is not outside the realm of possibility that all of this, while painful for the average consumer, is like music to the ears of the big tech companies that are lurking in the shadows. When the biggest two tech boys decide enough carnage has taken place and that there is an opportunity to clean up, what will TV look like? Will it follow the same pattern and we are destined to just pay a different piper, or will a revolution take place?

I hope it is an evolution, and we can get back to watching content on our screens and the consumer can pay a fair price for a product.

I do not have a crystal ball on this subject, but if a tech company looks at the goings on and believes that there is a way to build an antenna into a set top box or phone or modem, where does the argument of the networks then go? The cable companies will be out of business and the tech companies will not be burdened with highly expensive local “free off-airs.” Instead, they will be free again, and as the networks will continue to believe that they can build apps better than everyone else, they will be giving us the option to buy their flavor of OTT.

This could be a really interesting few years and once again the loser is the average Joe and Joanna that just wants to watch something on any device where it will be on and not blacked out. Television will survive and grow, and consumers are likely to find ways of getting this content when they want it, how they want it — and maybe even at a fair price.

Stuart Smitherman is president and co-founder of Vivicast Media, which licenses content to MVPDs.