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Northwest Station Pulls Signal in Retransmission Battle

In an escalating battle over retransmission consent, KAYU, the Fox affiliate in Spokane, Wash., has yanked its signal from Time Warner Cable systems in three states. KAYU is asking for cash. Time Warner refuses to pay, offering only advertising time.

The station’s demand that Time Warner pay cash for the right to retransmit its signal—and its willingness to go dark until the cable operator relents—is the latest indication of broadcasters’ increasing boldness over this perennial issue.

At midnight on Dec. 14, KAYU went dark in more than 25,000 subscriber homes in Pullman, Wash., Libby, Mont. and two cities in Idaho, Coeur d’Alene and Moscow. Time Warner, which took over the systems from Adelphia in August, is offering advertising time, but KAYU says that’s not enough.

“Time Warner puts no value on over-the-air broadcasting,” says Brian Brady, Chairman of the Fox affiliates and president of Northwest Broadcasting Corp., which owns KAYU among other stations in Oregon and New York. “They think because it’s free, they should have the right to put that signal on their systems and charge the subscribers for it.”

Neither side will say how much KAYU is seeking, but the station says it is asking for fees smaller than what cable companies pay many cable channels for the right to carry their programming.

Time Warner says it does not want to set a precedent by paying retransmission fees that would lead to higher bills for subscribers. According to a Time Warner spokesperson, KAYU has rejected several offers the company made during negotiations, increased their cash demand by some 400% and refused to grant the company another extension before pulling their programming.

“Clearly they are not seeking to reach an agreement,” the representative said. “And they are not concerned about their viewers.”

While broadcasters often accept advertising time or carriage of sister stations in exchange for the allowing cable systems to retransmit their signals, many are beginning to exercise their legal right to demand cash. So far, stations have gotten cash mainly from satellite and small cable operators.

“This is going to be the biggest fight for broadcasters for the next couple of years,” says Brady. “They want to buy advertising and have the retransmission rights thrown in.”

NBC Universal has used retransmission leverage from its owned-and-operated stations to get carriage and license fees for its cable stations, such as CNBC and MSNBC. But other broadcasters, including CBS, are pursuing cash compensation for their stations’ content. CBS’ deal with Verizon’s new FiOS video service reportedly pays 50 cents per subscriber.

Kagan Research projects that station owners stand to collect some $225 million in retransmission fees this year from cable and satellite operators and telcos, and $1 billion in 2009, the year some station owners’ cable deals, notably CBS, come due then.

In a standoff similar to the KAYU/Time Warner impasse, Nexstar pulled its stations off cable systems in four small markets in December 2004 after the operators refused to pay the 30¢ per subscriber rate Nexstar was seeking. Most of the disputes have been resolved, and Nexstar says the majority of cable operators are paying cash (however, CableOne and Cox, two of the biggest operators Nexstar fought, are not). Nexstar says retransmission fees will go from almost zero to some 15% of the company’s cash flow over the next five years.

With KAYU dark in Time Warner homes, the company has provided subscribers with free rabbit-ear antennas in order to access the station’s broadcast, including Seattle Seahawks football and the college bowl games, and recommends that they access Fox programming online. (Time Warner would not say whether or not it has lost subscribers over the issue.)

Time Warner and Northwest Broadcasting are bracing for another potential standoff over a MyNetworkTV affiliate in Binghamton. The cable operator has provided cautionary notice to WBPN viewers that the station could be pulled there after Dec. 31, the scheduled deadline for a retransmission agreement between the two parties.