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Small Ops Practicing Art of Retrans 'War’

San Diego— Small cable operators assembled last week for basic training in the art of waging war against a potential enemy — the nation’s broadcasters — and in outmaneuvering a savvy competitor, direct-broadcast satellite.

Military metaphors abounded at the joint annual meetings of the American Cable Association, a lobbying group, and the National Cable Television Cooperative, a buying co-op. Both organizations serve small independent operators.

Looming retransmission-consent negotiations were the topic du jour at both the NCTC’s three-day “Hooked on Cable” confab and the ACA’s half-day session, and that’s when the lingo about doing battle against TV-station owners turned up.

“We’re almost hunkered down in the bunker waiting for the shells to drop,” said Patrick Knorr, general manager for Sunflower Broadband and the ACA’s vice chairman, referring to the retransmission talks that will kick off this fall.

As ACA general counsel Chris Cinnamon put it, “This is a fight for fundamental turf for your business.”

The roughly 900 NCTC meeting attendees even got an eyewitness report from a retransmission-consent battlefront where combat has been in progress for seven months. Cable One Inc. CEO Tom Might presented a detailed account of his company’s dispute with Nexstar Broadcasting Group Inc., whose cash-for-carriage demands resulted in stations being dropped Jan. 1 from the MSO’s systems in Joplin, Mo., and Texarkana, Texas.

In addition to offering strategies for dealing with broadcasters, the NCTC meeting directly addressed ways to fend off the assault of DirecTV Inc. and EchoStar Communications Corp.’s Dish Network. One panel was called “What It Takes to Compete: Cable vs. DBS,” and discussed the satellite players’ aggressive moves with digital video recorders and HDTV.

The other session was called “The Triple Play and Beyond,” and talked about bundling as an edge against satellite providers.

The NCTC, whose membership has roughly 14 million subscribers, and the ACA, whose operators are in more than 8 million homes, represent the same constituents. Their overlapping membership is worried about being squeezed by broadcasters during the coming round of retransmission-consent talks because, as smaller operators, they lack the market leverage and clout of large MSOs.


Cinnamon reminded attendees that stations must elect retransmission consent by Oct. 1, since most current contracts expire Dec. 31.

But Cable One and Cox Communications Inc. had some retransmission-consent deals that expired at the end of last year, which led to the current standoff over cash for carriage with Nexstar. Both Cox and Cable One lost some of the broadcaster’s stations as a result of the dispute.

During a keynote address last week, Might contended that because of the ratings declines it suffered with its stations off cable, Nexstar has been bloodied worse overall than Cable One, despite the subscriber losses his MSO has endured.

“I’ve decided that yes, we’ve had losses, but they are so small compared to what Nexstar has lost it is to our advantage as Cable One — and even to the industry’s advantage — that we be public about what losses we have had,” Might said. “You will be amazed at the difference. … It says bluntly … broadcasters need us more than we need them. We now have the facts to prove it.”

In both Joplin and Texarkana, Cable One lost about 7% of its basic subscribers after it dropped the Nexstar stations, not the 20% that the broadcaster had claimed, according to Might. For example, in Joplin the cable operator’s 40,000 subscribers declined to 38,500, he said.


But Cable One made up for more than half that loss by signing up high-speed data customers, so the drop in basic and high-speed subscribers combined netted out to 3.7%, Might said. In Texarkana, when Cable One’s basic and high-speed homes are combined, the MSO suffered a 4.6% drop in those customers, according to Might.

In comparison, ratings for the Nexstar stations dropped by Cable One have decreased by double digits. Total-day ratings for Nexstar’s three stations dropped from 29% to 40% from last November to May, according to Nielsen Media Research data cited by Might.

Might’s interpretation of those numbers is that while Cable One had essentially been providing 29% to 40% of Nexstar’s viewership at the affected stations, the broadcaster, in effect, was only giving the cable systems a 7% lift in their video-subscriber count.

“How are they going to make up the revenue losses?” he said. “We know we make a lot of money on high-speed data. It doesn’t bother me at all to trade off a video subscriber for a high-speed data subscriber.”

Nexstar’s stock was trading last Tuesday at about $5, Might said, far below its prior highs of about $14.

“Nexstar is either desperate or nuts, or both,” Might said. “Why would you jump from a wire without a net underneath you?”


In response, Nexstar executive vice president Duane Lammers claimed his company’s data suggests that Cable One has lost more customers than Might said.

“I don’t think we ever said, and I don’t think they’re saying, that anybody’s winning this,” Lammers said in an interview. “I don’t think anybody’s winning. I think the whole situation is bad for both companies. … There have been casualties on both sides, and I’m not going to dispute that.”

Nexstar is working very closely with DirecTV Inc. and Dish Network “on some deals that could greatly enhance our situation, as well as other broadcasters’, as we move forward,” according to Lammers.

“We have having productive discussions with other MSOs,” he said. “The vast majority of the people that are in the cable business and the satellite providers understand the value that local stations provide and are willing to find a way to reach an agreement with us. We’ll do deals with people that see it that way.”

During the NCTC’s closing panel last Wednesday, titled “Top Guns,” both Knorr and Ben Hooks, partner and CEO of Buford Media Group, said they expected retransmission-consent woes. In fact, Hooks indicated that his small 50,000-subscriber systems wouldn’t buckle under to station demands.

“There is a lot of value in which you bring and they [broadcasters] need to appreciate it,” Hooks said. “They’ve gotten reckless, and I guess to summarize it we have probably 60 channels or 60 broadcast stations we’ve got to deal with, and we’re going to step up to the challenge.

“I know it’s ugly. I know it’s hard because we’ve got a competitor that makes it a little more complicated now, it brings local-into-local, but we really do bring value, and I don’t think we should be taken advantage of.”

Both the NCTC and the ACA have taken steps to create blueprints for small operators to follow as they try to work through carriage agreements with broadcasters this year.

For example, the NCTC had Cinnamon draft a boilerplate retransmission-consent contract that operators can use as a template, according to co-op senior vice president of programming Frank Hughes.

“It may be a starting point or an adjunct to an existing agreement,” Hughes said.


The ACA is also talking to the Association of Public Television Stations about forging an agreement covering the carriage of public television stations and their digital multicast services, according to ACA CEO Matt Polka. The National Cable & Telecommunications Association and APTS struck such a digital-carriage deal earlier this year.

“The reason for considering such an agreement is political in nature,” Polka told his members.

It would show Washington that TV stations and cable operators can hash out their own deals relating to the carriage of digital signals, without the government intervening in the process, and be proof that operators are willing to carry “compelling” multicast programming, according to Polka.

He stressed that if his group does strike an agreement with public television, it would completely up to each ACA member to “opt in” and participate or not.