ACA Says Retrans is Squeezing too Hard

PITTSBURGH: The cable industry has not yet rolled over on retransmission consent, whether or not it comes up in pending satellite copyright legislation. The American Cable Association this week released a summary of how broadcasters reaped hefty retrans fees from cable operators in the first quarter of this year. The broadcast lobby in turn released numbers showing how much money cable operators are making from subscribers.

The ACA, representing 900 smaller cable operators serving 7 million subscribers, now has veteran Multichannel News scribe Ted Hearn working the flak guns.

"Financial results for the first quarter in 2009, one of the softest economic periods in decades, produced excessively large retransmission consent gains for several local TV station groups, further bolstering the American Cable Association's contention that the retransmission consent process is broken," Hearn wrote on behalf of the ACA. "In recent weeks, several publicly traded TV station groups reported their January-to-March earnings, with each one breaking out its retransmission consent revenue gains on a percentage and dollar basis. The results ranged from truly excessive to borderline obscene."

The ACA said Journal Communications reported $1.3 million in retrans, up 333 percent (unconfirmed). Hearst-Argyle's retrans rose 98 percent to $12.4 million. LIN TV's retrans-plus-digital revenues increased 82 percent to $8.9 million. Belo was up 10 percent to $9.7 million, and Sinclair's retrans revenue rose 7.5 percent to $21.1 million.

Dennis Wharton, spokesman for the National Association of Broadcasters and himself a former Variety scribe, shot back.

"With cable's profits rising five times as much as their programming expenses, it is absolutely illogical to claim that retransmission consent plays a significant role in the continued escalation of cable subscription rates," he said in a statement.

The NAB said "a recently released study" showed that cable gross profits per subscriber increased nearly 29 percent between 2003 and 2006. Programming expense per sub rose 18 percent during the same period. The unnamed study was quoted as saying that retrans accounted for 0.2 percent of cable revenues.

ACA President and CEO Matt Polka nonetheless said escalating retrans fees are why cable subscription costs are rising.

"Not only do these excessive carriage fees drive up the cost of subscription TV, but small cable operators then have less money to invest in their networks to deliver more channels in HD, faster broadband Internet speeds and advanced phone services with multiple low-cost features," he said.

The ACA release goes on to say that under the current retransmission consent regime, network affiliates have exclusive rights within their own markets and can name their price for cable or satellite distribution. Retrans negotiations have become increasingly tense in the last two years as broadcasters demand payment to provide HD signals for which they say cable operators charge a premium. Several times, station feeds have been pulled from multichannel distribution systems during stalled negotiations. The structure, ACA says, is unfair to small carriers.

Congress initially was expected to review retransmission rules when it took up the Satellite Home Viewing Extension and Reauthorization Act. The law provides satellite TV providers with the right to license local broadcast signals. It was created 21 years ago, renewed again in 1994, and is set to expire at the end of this year. Polka said members of Congress "have expressed a desire" to leave retrans out of the SHVERA renewal.

"However, long term ACA remains committed to finding a solution to this problem," he said. -- Deborah D. McAdams