01.23.2005 08:00 AM
Texas broadcaster pulls stations off cable

Tens of thousands of television viewers in West Texas and Missouri are caught up in a dispute between a Texas-based broadcaster and two major cable operators, Cox Communications and Cable One, reports the Associated Press.

The issue is whether the cable systems are going to pay Nexstar Broadcasting Group of Irving, TX, for its program feed. Nexstar ordered Cox to stop carrying its station KRBC-TV, an NBC affiliate, on its Abilene cable system starting Jan. 1; and KLST, a CBS station in San Angelo, TX, after Cox balked at Nexstar’s demand that it be paid for their use.

Since then, cable subscribers have needed an antenna to get the stations. The same situation exists for Cable One viewers of Nexstar’s KTAL-TV, an NBC affiliate in Texarkana, TX, and its ABC and NBC affiliates in Joplin, MO. Cox also plans to drop the Joplin stations at the end of this month.

Atlanta-based Cox, the nation’s third-largest cable operator with 6.3 million cable subscribers, replaced the stations with HBO Family.

Nexstar operates 27 television stations, mostly in medium-sized cities from Texas to Indiana. It has grown rapidly through acquisitions, but has lost more than $180 million since the beginning of 2001 and is trying to pay down $600 million in debt, more than its revenue over the past four years for which it has reported complete results.

Duane Lammers, Nexstar’s COO, told the Associated Press that the company faces costs such as meeting a future requirement to convert to digital and must be paid for its signals. “We just happen to be the first company that had this dropped in our lap, but it’s going to become an all-out war or our industry is going to go out of business,” he said.

While disputes over payments have led cable systems to drop some cable channels for a few days, skirmishes with broadcasters are less common and most end with the TV station backing down.

“If they withhold their signal from cable, their ad revenue falls by 75 percent or so” because the audience shrinks to those with antennas or satellite, said Craig Moffett, an analyst with Sanford Bernstein. Advertisers pressure the broadcasters to back down, he said.

There have been no negotiations since the Nexstar stations went off cable at the start of the year. Both sides predict the outcome could have far-reaching implications when hundreds of local stations around the country negotiate new three-year agreements with cable operators this fall.

“If the outcome of this is that Nexstar gets paid, we may see more broadcasters going this way,” said Tom Basinger, a vice president of Phoenix-based Cable One, which is owned by the Washington Post Co. and has more than 700,000 customers in 19 states.

To Lammers, the Nexstar executive, it’s simple: If cable companies take his stations’ signals and resell them to viewers, “It’s only fair we get a piece.”

Nexstar wants the cable companies to pay 30 cents per month per subscriber to carry each station for the next three years. “That isn’t anywhere near gouging,” Lammers said. “That’s about what satellite systems pay Nexstar for carriage.”

Connie Wharton, West Texas general manager for Cox cable, said Nexstar’s demand would cost her company $1.7 million a year and force it to raise rates, which already average around $50 a month. She said broadcasters shouldn’t charge cable systems for a signal they give away on the public airwaves.

The government designates this as a free over-the-air signal, she said. “Non-cable customers don’t pay for it, and our customers shouldn’t either.”

Under rules in place since 1992, local TV stations can demand that cable carry their signal — for free — or require cable operators to get their consent for retransmission, which is the approach that Nexstar took.

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