Cable Operators

Sinclair, Comcast Parley

2/13/2005 7:00 PM Eastern

Comcast Corp. and Sinclair Broadcast Group Inc. are hammering out a long-term digital-HDTV carriage deal that could serve as “a template” for the rest of the cable industry, an official at the broadcast company told analysts last week.

The nation’s largest cable company and Sinclair are in the process of finalizing an agreement in principle they previously reached that allowed Comcast to carry the Super Bowl XXXIX in the six markets where the broadcaster owns or operates a Fox affiliate. Those markets are Baltimore, Pittsburgh, Nashville, Richmond, Va., Charleston, N.C., and Paducah, Ky.

During a fourth-quarter earnings conference call, Sinclair CEO David Smith spoke in generalities when asked about the status of negotiations with Comcast.

WOULD BENEFIT BOTH

“We made a short-term deal with them to be able to carry the Super Bowl because we believe they were clearly acting in good faith in an effort to construct a long-term deal with us, and my sense is that we should get that deal done,” Smith told analysts. “I can’t tell you if it’s going to be in 20 minutes or 20 days. But everybody’s working on it very hard and in the end, if we do get it done, it will clearly be in Comcast’s best interest and our best interests.”

Both Smith and a Comcast spokeswoman declined to comment on whether or not the MSO will be tendering cash to carry Sinclair’s HDTV or digital signals.

“I’m just not going to comment on it … because I know Comcast’s sensitivity to disclosing these kinds of things, and certainly it’s not in our best interest to disclose anything, given that we’ll be negotiating with 100 other cable companies — systems,” Smith said.

In a letter to viewers, Sinclair said it wants “no more than 50 cents per subscriber” for its digital signals.

Sinclair owns, operates or provides sales services to 62 TV stations in 39 markets.

“In the event we do get a deal done with Comcast, my sense is that will kind of lay the groundwork for every other cable company within our industry where we broadcast,” Smith said. “My sense is it’ll become somewhat of a template for other cable companies to look and say, 'Well, if Comcast can do the following, then I guess we better be prepared to do the following, given that they’re the leader in the industry.’ So we’d like to get it done.”

The Comcast spokeswoman said the digital-signal carriage deal it’s finalizing with Sinclair is comparable to the pacts it has struck with other broadcasters.

During its conference call, Sinclair also voiced its support for Nexstar Broadcasting Group Inc., which has pulled the signals for several of its stations from Cox Communications Inc. and Cable One Inc. in a retransmission-consent dispute over cash for carriage.

“They deserve a lot of credit and I hope they succeed,” Smith said. “I think [Nexstar CEO] Perry [Sook] is in a unique situation because he is using the opportunity that he has in small markets.

“In a three-station marketplace … it just seems to be that the consuming public’s view of the world is going to be, If I can’t watch the basketball games on CBS or Desperate Housewives on ABC or whatever, they are not going to be deprived of that opportunity and they will go where they have to go get it.”

'STAGGERING’ DEFECTIONS

He added that he’s heard some “staggering numbers” in terms of cable-subscriber defection to direct-broadcast satellite in the markets where Nexstar pulled its stations’ signals.

“I don’t think that it really bodes well in the long term for the cable industry to want to do what they’re doing, from the standpoint of allowing these people to leave,” Smith said. “Because once they leave, there’s no reason to come back.”

He welcomed the entry of such telcos as Verizon Communications Inc. and SBC Communications Inc. into the video business, pointing out that markets will have four direct competitors — a cable company, a phone company and two DBS providers — all offering TV services.

“We think in the long term that’s a good thing for the industry to have four competitors who want our product, and I think as those four competitors kind of carve up the marketplace, we’ve got to kind of stand in the middle and figure out how to take the best financial advantage of it that we can,” Smith said.

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