Weighing In on Retrans

Broadcasters Deserve Compensation

Retrans is not broken. The business realities for both sides of the table in this market-based negotiation scheme are shifting as the landscape does. So, yes, it is uncomfortable. It calls for innovation. But it’s not broken.

Neither distributors nor content owners have wanted to launch new networks for years, and, of course, carriage of these networks has been multichannel video providers’ primary compensation to network-owned broadcasters for distributing their signals.

What still holds true: Broadcasters need to be compensated. Multichannel video providers are by definition in the business of selling video content, and like any business they need to procure product to sell. The broadcast networks are undeniably the most valuable product around; just glance at a ratings chart.

Cash, which is given to cable networks on a per-sub fee basis, is the obvious, established currency for content. Paying broadcasters cash for retrans will certainly call for a different way of budgeting and accounting on the distributors’ part. Perhaps they pay less for smallerdraw programming services, maybe call for a cut of ad time on broadcast networks or—gasp!—dip into margins. They could also decide to pass costs on to their customers.

Whatever they do, distributors have had plenty of time to gird for this. Even if Leslie Moonves hadn’t been talking publicly since 2006 about going for cash, it was plain that channel space was filling up and the Big Four would have to be compensated some other way. So, if it’s not cash they want to pay, distributors must come up with something else of true value.

This industry proves every day that it can work together to create innovative ways of doing business, and thousands of retrans pacts have been quietly, civilly forged in the last decade. Deal-making requires focus, energy and direct communication. So, rather than waste precious resources on campaigns that confuse the customer, raise attention from Washington and make the TV business as a whole look like badly behaved children, all parties would be best served by simply accepting the future—and planning for it.

Biting the Hand That Fed Big Media

So much for TV Everywhere. Big media companies never tire of repeating that they’re working to give consumers whatever they want, wherever they want it. And yet at the same time, the breakdown of negotiations between distributors and content providers meant that millions of New Yorkers couldn’t even watch the beginning of ABC’s Academy Awards in their own living rooms.

Those same folks spent the first three weeks of the year without access to Food Network and HGTV. And on it goes, unless someone steps in to stop the shocking state of affairs.

There are no good guys in this protracted retransmission debate, but one can hardly blame distributors for complaining when they’ve helped big media companies build and distribute the very lucrative cable businesses that now prop up the rest of those empires.

No one knows what horse-trades are going on beyond the dispute over the size of retransmission payments. But in the blink of an eye, distributors are now being asked to pay hefty charges for broadcast networks that were previously free, and were offered that way to help media companies get their cable channels off the ground.

The knock-on effect here isn’t likely to be discernibly higher fees when consumers truly have their choice of providers. It will be felt mostly by the plethora of cable channels that don’t command the fees of their big-brand brethren, and may even be forced to roll back their subscription charges due to lack of leverage.

Bigger players, too, are questioning where it leaves them. Discovery’s Bruce Campbell wonders: “What does it mean for us as competitors to that programming?”

At the same time that some set manufacturers are pioneering Internet- connected TVs, the retrans debates— and accompanying program blackouts—are popularizing Radio Shack’s rabbit ears and digital converter boxes. It’s not TV Everywhere; it’s TV at your neighbor’s house, if you’re lucky.