At the end of the day — as with many disputes — it all comes down to money. With an ever-expanding array of alternatives to broadcast television, the audience for the broadcast networks has declined, and executives are finding it increasingly difficult to grow the businesses under the current model.
Broadcasters have long envied the dual revenue streams of cable channels like ESPN. Those channels receive payment from cable companies like Cablevision for the right to carry their programming, and they sell advertising during the airing of the program.
The current roots to the retransmission dispute began a few years ago when the broadcast networks began to flex their muscles and demand larger payments from cable companies for carriage rights. They argued that broadcasters reach far larger audiences than any of the cable channels and determined that if a cable company didn’t carry their shows it would have many unhappy subscribers. So they began demanding more money for their retransmission rights.
For increased leverage, recent retrans disputes have come down to a deadline that involves a premier live television event — say the World Series, Super Bowl or the Oscars. When a network seeking higher fees pulls such major events from a cable outlet, the public gets irate and pressure builds. That’s why the FCC came in.
Broadcasters consider retrans negotiations their right and a matter of survival. If the government injects itself into the “private business negotiations of retrans,” said NAB President Gordon Smith, it could ultimately mean the flight of the Super Bowl from free TV.
“In the final analysis, injecting Washington into private business negotiations that have a 99 percent success rate only serves to embolden pay-TV companies,” said Smith.
“If the pay-TV giants succeed,” Smith said, “there will be further migration of premiere sporting events like the Super Bowl away from free TV, and a reduction in financial resources that sustain quality foreign language programming, local news and entertainment to a growing audience of more than 30 million Americans who rely exclusively on over-the-air television.”
Broadcasters argue that without what they see as fair compensation for their TV station signals, they will not have the dual revenue stream that allows them to bid against cable programmers for sports rights.
Consumer groups, on the other hand, see it differently. They welcome the FCC’s intrusion into a process that has been pushing up cable rates and uses consumers as guinea pigs in private financial disputes.
“These disputes between broadcasters and cable operators are becoming more frequent and increasingly bitter, and consumers are more than ever becoming innocent victims of those disputes,” said Gigi B. Sohn, president and co-founder of Public Knowledge, a nonprofit group.
Free Press Policy Counsel Corie Wright said a definition of good faith bargaining does little to stop companies from threatening to pull channels from subscribers, and it does less to help consumers who have lost channels they paid for during a blackout.
“Both sides of this market are broken, and the only lasting fix will be empowering consumers with information about the prices and terms for carriage of each and every channel in their subscription, as well as giving them the right to opt out of paying for any unwanted channels,” Wright said. “In the event of signals being pulled, consumers certainly should not have to continue to pay for channels that they no longer receive.”