Media Mogul Barry Diller is making headlines with his investment in Aereo, a new media company that will provide remote DVR storage and streaming of broadcast content. Aereo announced that it has raised $20.5 million in Series A funding led by Diller’s IAC. Diller also has a board seat.
Aereo plans to provide up to 40 hours of DVR space for $12 per month with the content being streamed to internet enabled devices (smart phones, tablets, web enabled TVs, etc.). For starters, Aereo in intends to offer the service to consumers in the New York City DMA starting in mid March. Initial reports of the technology are that it involves an array of tiny antennas, each dedicated to a single customer, feeding the hard drive (DVR) storage. It seems that the company is taking this tact in order to make the claim that they are an antenna rental service and not a multichannel service provider. In doing so, Aereo hopes to avoid the need to negotiate and pay retransmission consent fees and capture the “cord cutting” segment of the market with a product that would complement a consumer’s ability to receive cable programming via the likes of Netflix and Hulu+.
In the mean time, cable operators are reacting to declining subscriber numbers by starting to test and deploy lower cost packages that that have been stripped of expensive sports programming. Broadcasters are still talking about mobile digital broadcast services without much to show for it in the market. Both the cable ops and the broadcasters continue to arm wrestle over retransmission consent fees with the FCC almost a year into the process of a proposed notice of rulemaking on retransmission consent – but that’s another blog entry.
For now the initial news is out about Aereo’s plans have been announced. It is more than likely that New York area broadcasters are huddling with their attorneys this morning on the news to explore their options. One just has to wonder if the next headline will be “Broadcasters Attempt to Shoot Down Aereo with Cease and Desist Orders”.
Showing posts with label Cable Operators. Show all posts
Showing posts with label Cable Operators. Show all posts
Wednesday, February 15, 2012
Thursday, March 3, 2011
FCC Votes to Open Retrans NPRM
In a unanimous vote this afternoon, the FCC agreed to open a Notice of Proposed Rule Making (NPRM) related to the issue of Retransmission Consent. Recently a hot button topic as a result of several high profile disputes, the FCC’s concern with retransmission consent comes on the heels of a congressional hearing on the matter. While commissioners differ on the degree of actions that should be taken, all agree that adherence to the seven good faith standards in the rules are paramount.
To be sure, no new rules were adopted at this meeting; this was merely a vote to look into the matter and to hear from all of the concerned stakeholders; broadcasters, MVPDs and consumers. More than one commissioner warned that no parties to any negotiation should read into the NPRM any likely outcome, nor should anyone use the NPRM as a delaying tactic in their negotiations. The standards of good faith negotiation still stand. After all, the commission could go through the process and decide to do nothing – kind of like looking at the desert tray and just ordering coffee.
What does it mean for the industry? This is one more chance for all interested parties to go on record. If you are a broadcaster, the process works fine as a vast majority of retransmission consent negotiations are completed quietly and without incident. If you are a cable operator, the process is broken and the smaller a cable operator you are the worse it is broken. No doubt the ACA will be prepared to show that smaller cable operators pay a disproportionate higher rate as the result of MFN’s and weaker relative market leverage. The commissioners even specified that they want to hear from organizations that represent consumers too.
Make no mistake, retransmission consent will not be going away – that will require an act of congress. It is expected that the main focus of the commission will be to find a way to keep the signals available to consumer while cable ops and broadcasters hash out their deals and to find away to prevent consumers from being “held hostage” by the process.
In a related note, Comcast and Sinclair announced a “multiyear agreement-in-principle” for the carriage of 36 stations in 22 markets.
To be sure, no new rules were adopted at this meeting; this was merely a vote to look into the matter and to hear from all of the concerned stakeholders; broadcasters, MVPDs and consumers. More than one commissioner warned that no parties to any negotiation should read into the NPRM any likely outcome, nor should anyone use the NPRM as a delaying tactic in their negotiations. The standards of good faith negotiation still stand. After all, the commission could go through the process and decide to do nothing – kind of like looking at the desert tray and just ordering coffee.
What does it mean for the industry? This is one more chance for all interested parties to go on record. If you are a broadcaster, the process works fine as a vast majority of retransmission consent negotiations are completed quietly and without incident. If you are a cable operator, the process is broken and the smaller a cable operator you are the worse it is broken. No doubt the ACA will be prepared to show that smaller cable operators pay a disproportionate higher rate as the result of MFN’s and weaker relative market leverage. The commissioners even specified that they want to hear from organizations that represent consumers too.
Make no mistake, retransmission consent will not be going away – that will require an act of congress. It is expected that the main focus of the commission will be to find a way to keep the signals available to consumer while cable ops and broadcasters hash out their deals and to find away to prevent consumers from being “held hostage” by the process.
In a related note, Comcast and Sinclair announced a “multiyear agreement-in-principle” for the carriage of 36 stations in 22 markets.
Friday, February 11, 2011
Retrans Spat Goes Upstream: Crazy Like a Fox?
The next time you tune into your local Fox station and its not there, it may not be because your local cable operator was unable to reach an agreement for retransmission consent of its signal. News broke this week that Fox network has been in discussions with its affiliate group to obtain cash for carriage of network programming on their stations. Apparently the talks are not going well and Fox Network is starting to talk to the affiliate stations directly to reach deals. The affiliate board is accusing the network of taking a “divide and conquer” approach. Meanwhile, Fox asserts that they are just trying to get a deal done before they have to pursue “different distribution channels”. Things are getting contentious and now the negotiations are starting to play out publicly as if this was a battle between the stations and a local cable operator.
It seems that the proverbial shoe is on the other foot and the affiliates are none to happy about it. With most of the affiliates having retransmission consent deals in place with local cable operators and the two national satellite providers, the last thing they need is the network asking for a piece of the action that hasn’t been budgeted for. All this comes at a time when a deal between Fox and Time Warner Cable provides a workaround for the big MSO to get the network programming for up to a year should they encounter an impasse with a local Fox affiliate - lending credence to the “different distribution channels” threat.
To be sure, Fox COO Chase Carey has not been shy in saying that the network will pursue these kinds of retrans revenue sharing arrangements, so it should have come as no surprise to the affiliates. All the same this comes off as another instance where a broadcaster makes the spurious argument that they need subscriber revenues to flow back to them in order to “preserve free broadcast TV” all because they are seeing viewership continue to migrate to cable networks and more time spent online, undermining their advertising based business model.
Yes, this is a private business negotiation, but with TV a seemingly American birthright anything that results in viewers being deprived of network programming inevitably becomes a public policy issue. With retransmission consent having such a high profile, and the FCC slated to take it up at its March meeting, one wonders whether this is the wisest time for Fox to be pursuing this so aggressively. In the end, the affiliates will come to an agreement because they need the programming and Fox can’t pull the plug on a wholesale basis without the risk of being called in front of House and Senate panels to answer for its actions. Inevitably it all flows back to the consumer in the form of higher cable and satellite rates, putting even more pressure on consumers who are on the verge of “cord cutting”.
At this point, the rest of the “Big 4” are sitting back to see how this develops. While there are still a lot of unknowns as far as how this will play out, one thing is for certain, if this proves successful for Fox, watch for the rest to follow suit.
It seems that the proverbial shoe is on the other foot and the affiliates are none to happy about it. With most of the affiliates having retransmission consent deals in place with local cable operators and the two national satellite providers, the last thing they need is the network asking for a piece of the action that hasn’t been budgeted for. All this comes at a time when a deal between Fox and Time Warner Cable provides a workaround for the big MSO to get the network programming for up to a year should they encounter an impasse with a local Fox affiliate - lending credence to the “different distribution channels” threat.
To be sure, Fox COO Chase Carey has not been shy in saying that the network will pursue these kinds of retrans revenue sharing arrangements, so it should have come as no surprise to the affiliates. All the same this comes off as another instance where a broadcaster makes the spurious argument that they need subscriber revenues to flow back to them in order to “preserve free broadcast TV” all because they are seeing viewership continue to migrate to cable networks and more time spent online, undermining their advertising based business model.
Yes, this is a private business negotiation, but with TV a seemingly American birthright anything that results in viewers being deprived of network programming inevitably becomes a public policy issue. With retransmission consent having such a high profile, and the FCC slated to take it up at its March meeting, one wonders whether this is the wisest time for Fox to be pursuing this so aggressively. In the end, the affiliates will come to an agreement because they need the programming and Fox can’t pull the plug on a wholesale basis without the risk of being called in front of House and Senate panels to answer for its actions. Inevitably it all flows back to the consumer in the form of higher cable and satellite rates, putting even more pressure on consumers who are on the verge of “cord cutting”.
At this point, the rest of the “Big 4” are sitting back to see how this develops. While there are still a lot of unknowns as far as how this will play out, one thing is for certain, if this proves successful for Fox, watch for the rest to follow suit.
Wednesday, January 5, 2011
Comcast Announces iPAD Video App
Comcast CEO Brian Roberts got a jump on everyone at CES with an announcement on the eve of the 2011 show. It seems that Comcast will be making nearly 3000 hours of VOD content available for streaming on iPADs later this year with enhancements that will include the ability for users to tap into their social networks. In doing so, Comcast is the first cable MSO to truly take the concept of "TV Everywhere" to heart. Until now, MSOs that have launched so called "TV Everywhere" services have made their VOD content available on their branded websites in an effort to thwart other online video providers like Hulu and Netflix that have been chipping away at their subsription revenue by enabling cord cutting (more on that some other time). This move eliminates the inherent limitation of having a "TV Everywhere" product limited to home PCs and laptops and is an effort to shore up their Xfinity digital subscriber base among iPAD users; those who are aguably the early adopters who are the most prone to being cord-cutters.
Although limited to the iPAD device for now, this app is a great start to the "unleashing" or unteathering of TV Everwhere. For now Comcast is working where the content rights allow them, but I expect that a smartphone app is not too far down the road, of course, programmer rights permitting.
Although limited to the iPAD device for now, this app is a great start to the "unleashing" or unteathering of TV Everwhere. For now Comcast is working where the content rights allow them, but I expect that a smartphone app is not too far down the road, of course, programmer rights permitting.
Wednesday, December 1, 2010
Sweeney: ABC – Google TV Deal “Not Close”
In an interview with Reuters, Disney TV chief Anne Sweeney said that although they are in discussions with Google and have seen several demonstrations, ABC is "not close" to doing a deal to provide its content to the Google TV platform. This comes on the heels of both CBS and NBC blocking their content from Google TV.
Sweeney mentioned that piracy is one of the primary concerns, going so far as to say that it was unacceptable to ABC that the Google search platform present pirate sites when consumers search for ABC content on the web. Further, Sweeney indicated that ABC's web strategy is to provide limited programming from current seasons with wider access to prior season programming in order to drive value to the programming that is being shown on the broadcast network - moving the content through windows in a similar fashion as feature films.
In an age of instant Internet gratification and with the lesson of Napster fresh in their memories, it is little wonder that piracy is an issue for the broadcasters. They are being pressured by affiliates and cable operators who are telling them that putting content on the Internet lessens its value. Meanwhile, Gen X, Y and Millennial consumers are accustomed to having content served up at their convenience at a time and place and on the device of their choosing. They are less concerned with how it gets to them and not even remotely concerned with the content owners' business model.
Network executive like Sweeney are paid to follow the money. They are not going to jeopardize broadcast and cable dollars for digital pennies. Meanwhile, a significant portion of the Internet generation believes that content wants to be free; an attitude that undermines the business model of the content owners.
For now it looks like Google TV is on the market with only a limited amount of content. Absent providing "one stop shopping" with a line-up of content that more closely mirrors that of cable and satellite providers, Google TV is destined to be a niche curiosity product. Major content owners will not give away their product cheaply and will continue to demand assurances of security. Until Google can address the "fear of Napsterization", the big players will take meeting but won't be signing any deals soon.
Sweeney mentioned that piracy is one of the primary concerns, going so far as to say that it was unacceptable to ABC that the Google search platform present pirate sites when consumers search for ABC content on the web. Further, Sweeney indicated that ABC's web strategy is to provide limited programming from current seasons with wider access to prior season programming in order to drive value to the programming that is being shown on the broadcast network - moving the content through windows in a similar fashion as feature films.
In an age of instant Internet gratification and with the lesson of Napster fresh in their memories, it is little wonder that piracy is an issue for the broadcasters. They are being pressured by affiliates and cable operators who are telling them that putting content on the Internet lessens its value. Meanwhile, Gen X, Y and Millennial consumers are accustomed to having content served up at their convenience at a time and place and on the device of their choosing. They are less concerned with how it gets to them and not even remotely concerned with the content owners' business model.
Network executive like Sweeney are paid to follow the money. They are not going to jeopardize broadcast and cable dollars for digital pennies. Meanwhile, a significant portion of the Internet generation believes that content wants to be free; an attitude that undermines the business model of the content owners.
For now it looks like Google TV is on the market with only a limited amount of content. Absent providing "one stop shopping" with a line-up of content that more closely mirrors that of cable and satellite providers, Google TV is destined to be a niche curiosity product. Major content owners will not give away their product cheaply and will continue to demand assurances of security. Until Google can address the "fear of Napsterization", the big players will take meeting but won't be signing any deals soon.
Tuesday, November 23, 2010
Retrans Recap
So, the Retransmission Consent hearings are over (for now) and all of the usual suspects got to have their say on the issue. Keeping to the script, the MSOs asked for some changes in the regime, arguing that Retransmission Consent is another in the long litany of special privileges that broadcasters enjoy. Broadcasters insisted that they need a dual revenue stream to compete. Small programmers argued that the tying involved in many Retransmission Consent agreements makes it difficult for them to gain carriage. For the most part, the hearing was predictable and civil. It was, however, suprising to hear Jay Rockefeller (D WV) rant on the record about the polarizing nature of Fox News and MSNBC and his wish that the FCC could somehow make them go away. It was no suprise either that several Senators suggested the popular notion that the time may have come for the industry to consider a la carte pricing models. Other than that there was not much newsworthy that came of it as John Kerry (D MA) tried to keep the hearing focused on finding a solution to keep broadcast signals on cable systems during retransmission consent negotiations.
It's always easy to tell who benefits the most from the status quo - it's the guy who defends it the most vigorously. That was the role that Chase Carey from Fox played. Carey insisted that taking away the ability to deny carriage strips him of his leverage and eliminates any incentive for a cable operator to get a deal done. He also pointed fingers at Cablevision as the party that used it subscribers to win political gain. Well, there was a hearing after all.
More than a few eyebrows were raised by the fact that different cable providers in the same market can be charged different rates by the same broadcaster for the same signal. In an effort to bring a modicum of transparency to the process, it was suggested that the numbers involved no longer be subject to confidentiality (gasp!).
More than once the lawmakers suggested (or threatened) that if "the market" can't figure things out on their own, then Washington will get involved. With that stance it won't be a suprise that there will be more high profile retransmission consent disputes that result in temporary drops of broadcast feeds. For now it is hard to see what the appetite inside the beltway is for taking another swipe at cable regulation given the much larger problems that the country faces. One thing is for sure, once the ball gets rolling it may be a matter of "being careful what you wish for". Washington is a sausage factory. You can start out with the best of intentions, but along the way it inevitably gets ground up and flavoered beyond all recognition. But for now Retransmission Consent is like the weather, everyone talks about it but nobody does anything about it.
It's always easy to tell who benefits the most from the status quo - it's the guy who defends it the most vigorously. That was the role that Chase Carey from Fox played. Carey insisted that taking away the ability to deny carriage strips him of his leverage and eliminates any incentive for a cable operator to get a deal done. He also pointed fingers at Cablevision as the party that used it subscribers to win political gain. Well, there was a hearing after all.
More than a few eyebrows were raised by the fact that different cable providers in the same market can be charged different rates by the same broadcaster for the same signal. In an effort to bring a modicum of transparency to the process, it was suggested that the numbers involved no longer be subject to confidentiality (gasp!).
More than once the lawmakers suggested (or threatened) that if "the market" can't figure things out on their own, then Washington will get involved. With that stance it won't be a suprise that there will be more high profile retransmission consent disputes that result in temporary drops of broadcast feeds. For now it is hard to see what the appetite inside the beltway is for taking another swipe at cable regulation given the much larger problems that the country faces. One thing is for sure, once the ball gets rolling it may be a matter of "being careful what you wish for". Washington is a sausage factory. You can start out with the best of intentions, but along the way it inevitably gets ground up and flavoered beyond all recognition. But for now Retransmission Consent is like the weather, everyone talks about it but nobody does anything about it.
Friday, September 24, 2010
Programmers Seek Increases, Higher Cable Rates to Follow
An adage in investigative journalism was made popular during the heyday of the Watergate investigation; “Follow the Money”. Nowadays it seems you can follow the money spent for your cable or satellite service right back to the big media companies. Bob Iger at Disney is pointing to ABC Network taking a higher share of its broadcast affiliates retransmission consent fees, while Chase Carey over at Fox is telling his investors that National Geographic Channel and FX network should be receiving higher license fees from cable operators. Meanwhile, independent programmers like Hallmark Channel are seeing themselves dropped from line-up as providers like AT&T seek ways to reduce programming costs.
Guess what going to happen to your cable bill as ABC, FOX and others continue to demand increases in their license fees? That’s right; those increases are going to be passed directly on to the consumer. Anyone who thinks different or is of the belief that cable operators should absorb the increases should refer back to their Business 101 textbook. After all, Comcast, Time Warner Cable and all the rest have investors to answer to as well. With programming costs being one of the biggest line-items that cable operators have to deal with, what else would you expect?
Meanwhile cable operators seem to be whistling past the graveyard while they are losing subscribers and insisting that cord-cutting has nothing to do with it. All the while they are rolling out their own “TV Everywhere” services, providing a collection of video to their customers in a “walled garden” fashion.
Where does that leave the multichannel industry? Is cable dying a slow death, choking on ever increasing fees and programmer demands to carry a plethora of new channels that seem to come about with every contract renewal while customers are warming to the idea of program-by-program a la carte on line? Recent reports suggest that the industry is at the precipice of a long, slow decline. This isn’t the first time that the cable industry has seemingly stood at the edge of the abyss. No doubt the cable industry will find a way to survive this too.
Guess what going to happen to your cable bill as ABC, FOX and others continue to demand increases in their license fees? That’s right; those increases are going to be passed directly on to the consumer. Anyone who thinks different or is of the belief that cable operators should absorb the increases should refer back to their Business 101 textbook. After all, Comcast, Time Warner Cable and all the rest have investors to answer to as well. With programming costs being one of the biggest line-items that cable operators have to deal with, what else would you expect?
Meanwhile cable operators seem to be whistling past the graveyard while they are losing subscribers and insisting that cord-cutting has nothing to do with it. All the while they are rolling out their own “TV Everywhere” services, providing a collection of video to their customers in a “walled garden” fashion.
Where does that leave the multichannel industry? Is cable dying a slow death, choking on ever increasing fees and programmer demands to carry a plethora of new channels that seem to come about with every contract renewal while customers are warming to the idea of program-by-program a la carte on line? Recent reports suggest that the industry is at the precipice of a long, slow decline. This isn’t the first time that the cable industry has seemingly stood at the edge of the abyss. No doubt the cable industry will find a way to survive this too.
Thursday, January 14, 2010
Epix’s Epic Struggle
Officially announced in March of 2009 on the heels of a dispute with Viacom sibling’s CBS owned Showtime, Epix boasted $150 million in studio backing. The service initially made its content available online and officially launched its linear HD feed this past October. Take-up by cable operators has been slow, even if the service changed its business model from wanting to be part of a basic or digital tier at a cost of about $1.50 per subscriber the operator to being a premium service, with a premium online component only available to customers of its affiliates – making for a service with the potential to be a new revenue generator for cable operators. Until this week, the only provider that has signed on to carry the service is Verizon. This week, two more operators (Cox Communications, and Mediacomm) signed on the dotted line – both committing to an April 2010 launch.
One would think that a premium service model would be attractive to the operator, but the difficulty comes in selling a new service to subscribers on top of their existing bundle and the risk of the new service cannibalizing other premium services like HBO (owned by Time-Warner Inc.), Starz and the aforementioned Showtime. In part the need for an additional premium service in the market is why many cable and satellite operators like DirecTV and Cablevision indicated no interest in carrying the service when it was announced last spring. This is compounded by the fact that the service is made up of movies that have already been shown in their theatrical, hospitality, home video and VOD windows. Even so, revenue is revenue, and the lack of interest by major MSOs may have been more of a starting point in the negotiations than a definitive statement.
At the end of the day, unless EPIX can sign four of the top five 5 MSOs, they will struggle to become profitable and the three partner studios will be pressured to pull the plug on the service. Even though Comcast is focused on getting the NBC deal done and launching their Xfinity (TV Everywhere) service, and Time-Warner making rumblings that they are considering a rebranding, the multiplatform nature of Epix fits into Comcast’s strategic emphasis on on-demand and online video. Frankly, It’s surprising that they did not move quicker. Could it be that the Epix partners are unwilling to offer equity for carriage or is Comcast pushing for earlier VOD windows from the three partner studios as part of the deal?
On the flip side of the multiplatform aspect of the service, the online portion leaves the satellite providers out in the cold. Even if they could come up with the bandwidth to offer the linear service, DirecTV and Dish Network don’t have any local servers on the ground to cache the online HD service. Particularly telling is that, aside from Verizon, the wireline competitors like AT&T and RCN Corp. have yet to sign on. Ten months after an announcement, Epix has only announced three deals. Without the big guys in the tent, unless a whole lot more come soon, Epix could be history by the end of this year.
One would think that a premium service model would be attractive to the operator, but the difficulty comes in selling a new service to subscribers on top of their existing bundle and the risk of the new service cannibalizing other premium services like HBO (owned by Time-Warner Inc.), Starz and the aforementioned Showtime. In part the need for an additional premium service in the market is why many cable and satellite operators like DirecTV and Cablevision indicated no interest in carrying the service when it was announced last spring. This is compounded by the fact that the service is made up of movies that have already been shown in their theatrical, hospitality, home video and VOD windows. Even so, revenue is revenue, and the lack of interest by major MSOs may have been more of a starting point in the negotiations than a definitive statement.
At the end of the day, unless EPIX can sign four of the top five 5 MSOs, they will struggle to become profitable and the three partner studios will be pressured to pull the plug on the service. Even though Comcast is focused on getting the NBC deal done and launching their Xfinity (TV Everywhere) service, and Time-Warner making rumblings that they are considering a rebranding, the multiplatform nature of Epix fits into Comcast’s strategic emphasis on on-demand and online video. Frankly, It’s surprising that they did not move quicker. Could it be that the Epix partners are unwilling to offer equity for carriage or is Comcast pushing for earlier VOD windows from the three partner studios as part of the deal?
On the flip side of the multiplatform aspect of the service, the online portion leaves the satellite providers out in the cold. Even if they could come up with the bandwidth to offer the linear service, DirecTV and Dish Network don’t have any local servers on the ground to cache the online HD service. Particularly telling is that, aside from Verizon, the wireline competitors like AT&T and RCN Corp. have yet to sign on. Ten months after an announcement, Epix has only announced three deals. Without the big guys in the tent, unless a whole lot more come soon, Epix could be history by the end of this year.
Monday, January 11, 2010
Retransmission Consent Battles Are Over But the War Rages On
OK, so Time Warner Cable, Inc. cut a retransmission consent deal with FOX (News Corp.) just in time for the Sugar Bowl on New Years Day and Medicomm got their deal done with Sinclair Broadcasting before their extension ran out. Both deals got done without cable subscribers having their broadcast feeds cut off. With no more high profile deals pending you might believe the claims from the broadcasting camp that the market for retransmission consent in functioning efficiently and the cable operators should just go away quietly and lick their wounds. Not so.
Before the ink was even dry on the Sinclair deal, Mediacomm CEO Rocco Commisso had a letter on its way to Senator John Kerry (D. Mass) asserting that the retransmission consent system is broken. While some may dismiss this as a sign of a sore loser and broadcasters may argue that Medicomm would not have signed a deal they didn’t like, one should ask whether Mr. Commisso and his cable brethren have a point.
It seems that every time broadcasters lobby on the Hill it is done in the name of protecting “free” television. The recent broadcaster backlash to spectrum reallocation is just the latest opportunity for broadcasters to wave this flag. But in fact, doesn’t retransmission consent prove that there really is no such thing as “free” television. Of course, there are costs involved with producing and broadcasting content, and there is certainly value to the broadcast content. But isn’t it the broadcasters who chose to enter and remain in a business, the backbone of which is providing free over the air television on an advertiser supported basis?
Of course, the argument is always made that when compared to cable services like Walt Disney Co.’s ESPN, the broadcasters generate ratings far in excess of cable networks. As such, the argument goes, if broadcaster ratings are four times that of ESPN, then the broadcaster should be entitled to four times the license fee that ESPN collects. If the broadcasters are willing to step up to the plate and offer distributors VOD content, local ad avails and affiliate marketing support the same way cable networks traditionally do, then maybe there is a conversation to be had, but until then a game of “apples and oranges” is being played.
In the end, Retransmission Consent is a consumer issue. It easier for the Consumers Union and politicians to demonize cable operators then to dig in and see that what is actually driving the cost of multichannel video up – the ever escalating license fees paid to broadcasters and cable networks. While FOX may not have gotten the $1.00 out of Time Warner that it was looking for, they certainly did get some cash. Likewise, Sinclair has extracted their “pound of flesh” from Mediacomm and will be back at them for another portion at the end of this year when the deal expires. These are the stories of two of the bigger fish in the pond. Every year there are hundreds of smaller operators and telcos with similar stories that are even worse given their smaller size and limited, if any, negotiating leverage. For them, retransmission consent is yet another transfer of wealth out of their communities and local economies.
To be sure, cable operators like Comcast Corp. and Cablevision are reporting growth in free cash flow. However, once you dig deeper and find out where the growth is coming from you find it is not from traditional basic video services. The real growth is coming from DVR and bundled services relying on voice and data services where the only costs are those of running the physical network itself and content costs are virtually non-existent. As far as the linear video business goes, it seem that operators have become little more than collection agencies for cable networks and broadcasters.
If the cable operators can effectively turn Retransmission Consent into a consumer issue (especially in the midst of a recession) then they may actually have a chance of getting someone’s ear in Washington. Until then, expect the politicians to take credit for pushing operators to keep broadcast signals from going dark, but don’t expect them to get involved in really addressing what’s at the heart of the matter.
Before the ink was even dry on the Sinclair deal, Mediacomm CEO Rocco Commisso had a letter on its way to Senator John Kerry (D. Mass) asserting that the retransmission consent system is broken. While some may dismiss this as a sign of a sore loser and broadcasters may argue that Medicomm would not have signed a deal they didn’t like, one should ask whether Mr. Commisso and his cable brethren have a point.
It seems that every time broadcasters lobby on the Hill it is done in the name of protecting “free” television. The recent broadcaster backlash to spectrum reallocation is just the latest opportunity for broadcasters to wave this flag. But in fact, doesn’t retransmission consent prove that there really is no such thing as “free” television. Of course, there are costs involved with producing and broadcasting content, and there is certainly value to the broadcast content. But isn’t it the broadcasters who chose to enter and remain in a business, the backbone of which is providing free over the air television on an advertiser supported basis?
Of course, the argument is always made that when compared to cable services like Walt Disney Co.’s ESPN, the broadcasters generate ratings far in excess of cable networks. As such, the argument goes, if broadcaster ratings are four times that of ESPN, then the broadcaster should be entitled to four times the license fee that ESPN collects. If the broadcasters are willing to step up to the plate and offer distributors VOD content, local ad avails and affiliate marketing support the same way cable networks traditionally do, then maybe there is a conversation to be had, but until then a game of “apples and oranges” is being played.
In the end, Retransmission Consent is a consumer issue. It easier for the Consumers Union and politicians to demonize cable operators then to dig in and see that what is actually driving the cost of multichannel video up – the ever escalating license fees paid to broadcasters and cable networks. While FOX may not have gotten the $1.00 out of Time Warner that it was looking for, they certainly did get some cash. Likewise, Sinclair has extracted their “pound of flesh” from Mediacomm and will be back at them for another portion at the end of this year when the deal expires. These are the stories of two of the bigger fish in the pond. Every year there are hundreds of smaller operators and telcos with similar stories that are even worse given their smaller size and limited, if any, negotiating leverage. For them, retransmission consent is yet another transfer of wealth out of their communities and local economies.
To be sure, cable operators like Comcast Corp. and Cablevision are reporting growth in free cash flow. However, once you dig deeper and find out where the growth is coming from you find it is not from traditional basic video services. The real growth is coming from DVR and bundled services relying on voice and data services where the only costs are those of running the physical network itself and content costs are virtually non-existent. As far as the linear video business goes, it seem that operators have become little more than collection agencies for cable networks and broadcasters.
If the cable operators can effectively turn Retransmission Consent into a consumer issue (especially in the midst of a recession) then they may actually have a chance of getting someone’s ear in Washington. Until then, expect the politicians to take credit for pushing operators to keep broadcast signals from going dark, but don’t expect them to get involved in really addressing what’s at the heart of the matter.
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