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Cable Operators Complain of Retrans 'After' Effects

Cable operators large and small -- but particularly the smaller ones -- are complaining about what they see as a growing trend: after-acquired clauses. The clauses are addenda to retransmission consent agreements concerning how those deals apply to TV stations -- or cable systems -- acquired by either party during the duration of the agreement.

One variant of the clause that cable operators say is becoming more popular gives a broadcaster the ability to potentially raise the retrans take for any stations it acquires by bundling it into existing deals.

Smaller and midsize cable ops say they are now being used as retrans arbitrage to secure local marketing agreements or group retrans deals. Meanwhile, a broadcast lawyer experienced in retrans negotiations calls that statement laughable, adding that these tenets are simply negotiable provisions that no cable operator is required to agree to.

“We saw them a little bit in the last round of retransmission consent negotiations, and then in the most recent round they proliferated,” says Chris Cinnamon, a partner at Cinnamon Mueller, outside counsel to the American Cable Association representing smaller cable operators across the country.

Smaller operators aren’t the only ones complaining about the clauses. Mike Heimowitz, a representative for the American Television Alliance, said some of his members also see this as a growing, insidious trend.

“This is just another tactic they are using to take advantage of the regulations to squeeze more money [out of cable operators],” Heimowitz says. “They are shopping their deals to other stations and group owners so they can try to jack the price up. So either it is done through an acquisition, or they get some kind of clause in the contract where they may not be commonly owned but are able to leverage their power to increase rates.”

But broadcast industry attorney Jack Goodman says the arbitrage suggestion “does not pass the laugh test.”

“I can’t know what is in everybody’s heart when they do an LMA, but these are huge deals and represent substantial financial commitments on the part of the parties to essentially integrate two TV stations, and they are usually very long-term deals,” Goodman says.

Goodman suggests no one is forced to agree to the clauses. “Nobody enters into one of these things without seeing what they are, and if somebody doesn’t want to agree to it, they don’t have to,” he says. “They work both ways, though. There are also provisions that say what happens if another cable operator acquires another cable system.”

But the Federal Communicatons Commission is paying special attention to bundled retrans negotiations. FCC chairman Julius Genachowski told operators at last week’s Cable Show in Boston that while it is fine for broadcasters to seek compensation for their programming -- cable ops would argue the government’s thumb is on the scale via the must-carry/retrans regime -- a shared services agreement that turns negotiation for a “permissible” duopoly into three stations negotiating together for retrans presents something much more problematic.

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