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FCC Inquiry Reopens Exclusivity Battle

As the networks prepare to roll out their new programming, a fight could be rekindled between TV broadcasters/studios and the multichannel video programming distributors who deliver much of the new season’s network (and syndicated) programming to viewers.

The issue is essentially whether MVPDs should be able to import duplicative content when they can’t strike retransmission-consent deals with in-market stations.

Broadcasters want to preserve the prohibitions, saying exclusivity is critical to their ad-supported business models; MVPDs see those rules as giving broadcasters a thumb — and a couple of fingers — on the scale in retrans negotiations, since MVPDs don’t have an alternative to network and local content if its unavailable during retrans-related impasses.

The renewed interest in the issue stems from FCC chairman Ajit Pai’s decision to seek input on every media regulation on the books and what the agency should do, if anything, about them.

The rules at issue are the aptly named network nonduplication rule, in the case of network programming, and the syndicated exclusivity rule, in the case of syndicated fare.

The issue has always been a hot-button one in the battles over whether the FCC should revamp the retransmission-consent regime — battles that could be newly joined thanks to the FCC inquiry.

NTCA-The Rural Broadband Association, whose members include smaller MVPDs, says the syndex and network nondupe rules are antiquated and “prevent MVPDs from obtaining programming demanded by consumers from alternate sources beyond designated geographic zones.” In other words, broadcasters’ chokehold over programming is not a function of “the marketplace,” but rather one of government fiat.

That allows broadcasters to raise rates, knowing that an MVPD can’t turn to a duplicative out-of-market station to add negotiating leverage of its own, NTCA has said. “Enabling small MVPDs to obtain programming from neighboring geographic areas and have options regarding price would inject a modicum of market forces into the retransmission consent process for those most vulnerable to the stranglehold on content.”

The National Association of Broadcasters has argued that while NTCA frames the changes as “simple alterations” to the rules to balance retrans negotiations, they are anything but.

The association told the FCC that both the commission and Congress recognize that retransmission consent, network nonduplication and syndicated programming exclusivity rules are interrelated and “work together to ‘eliminate the artificial handicaps exacerbated by disparate regulatory treatment.’ ” (Both broadcasters and cable operators agree there is disparate regulatory treatment, but each sector argues it is on the short end of that stick.)

The NAB has said the rules are not outdated, or burdensome. “On the contrary, this trio of interrelated rules ensures that broadcasters have the ability to engage in free-market negotiations with MVPDs to retransmit their signals as Congress intended.”

Studios Say ‘Hands Off’

The Hollywood studios are all for taking a second look at media rules, including children’s TV limits and mandates, but they want the FCC to keep its collective hands off the network nonduplication and syndicated exclusivity rules as part of any revamp of retransmission consent. They have another take on the interrelationship. They argue that if the FCC did get rid of the rules it should only do so if the compulsory license regime is jettisoned as well. Since the latter takes Congress, in essence the studios are saying “hands off” the rules.

The compulsory license allows cable operators to carry network TV-station programming for a set fee, rather than having to negotiate individually with each programming rightsholder.

“Absent assurances that duplicative programming won’t fracture its audience — and thus its advertising revenues — a local broadcast station is far less likely to invest in high-value content or take a risk on anything other than mass appeal programming,” Motion Picture Association of America senior vice president Neil Fried told the FCC on behalf of The Walt Disney Co., Paramount, Sony, Fox, Universal and Warner Bros.

Preston Padden, former president of the ABC Television Network and executive VP of parent Disney, agreed. “It is idiotic that in 2017 Congress still gives the cable/satellite companies a free government granted compulsory copyright license for all the programs on local TV stations,” Padden told B&C. “But as long as that license exists it is imperative that the FCC retain the Syndex and Non-Dup rules because they act to prevent the government-granted license from ‘Trumping’ licenses negotiated in the marketplace.”

John Eggerton
John Eggerton

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.