News

Political Window-Dressing

7/18/2008 8:00 PM Eastern

Disney announced this week that it is concerned over the retransmission-consent plight of small, independent cable systems, and that, as a result, The Walt Disney Co. will grant these smallest providers the right to carry Disney's owned-and-operated broadcast stations free of retransmission consent fees.

Don't get me wrong — I'm happy to have the little relief that Disney will be giving to my small, independent cable system, Catalina Cable, in Avalon, Calif., for carriage of Disney's KABC-TV in Los Angeles. And it's about time that Disney recognized that smaller companies like mine — 1,300 subscribers — are at a significant disadvantage when negotiating for retransmission-consent rights to carry channels like KABC.

My small business negotiating against Disney is like a flea trying to steer an elephant. It just doesn't happen; we don't serve enough customers to matter to them. The way these agreements usually work is, Disney, or another network or broadcast group, says, here is the price you will pay and the terms you will agree to. You can either agree to pay this higher price and carry our additional programming, or not carry any of it. End of story.

So why did it take so long for Disney to make the ground-breaking admission that smaller operators have unique concerns and are harmed in different ways when it comes to retransmission consent? And more to the point, did Disney come to this conclusion out of the goodness of its heart?

The simple answer is that because independent operators and the American Cable Association are pushing to end retransmission-consent abuse and eliminate programming tying, Disney is hoping to mollify lawmakers and regulators in Washington who are now taking a closer look at these abusive practices. This offer wasn't meant to solve the retransmission-consent mess that exists in today's marketplace. It is a ploy to create political theater, deflect criticism and maintain the status quo that guarantees Disney's coffers billions, and it came at a very low price.

Based on information from our fellow ACA members, Disney's offer will cover only about 60,000 subscribers (far less than 1% of our ACA membership's customers). Beware of a gift that costs nothing but comes with a price. If Disney charges cable operators $1 per subscriber per month for retransmission consent, that amounts to less than $1 million per year in lost retrans revenue to Disney — pretty much a rounding error on its multibillion-dollar financials.

If Disney or any other broadcaster wanted to legitimately address the broken retransmission-consent regime for the good of the cable industry and cable customers paying too much for channels they don't want or watch, then it would have taken real action. First and foremost, they would have agreed to a definition for retransmission-consent relief that provided cable operators with minimal market presence in the broadcaster's DMA. If a cable operator serves 15% or less of the DMA, broadcasters do not negotiate with cable operators, and cable operators have no leverage on behalf of their customers to negotiate fair, market-driven retransmission-consent deals. This is the definition of price discrimination, and it is the cable customer that pays the price.

The true litmus test of the Disney — or any other network or programmer — commitment to real and meaningful reform of the retransmission regime or even relief from its mounting burden will be between the lines of their generosity.

  • If Disney is sincere about solving the retransmission-consent crisis, then why isn't relief being extended to all cable operators with minimal market presence in Disney's broadcast markets?

  • How many subscribers and companies will receive any help from Disney, and which ones? Based on my fellow ACA members, I know it will cover only about 60,000 subscribers, despite the fact that there are millions of viewers in Disney's markets.

  • Why isn't Disney urging its fellow broadcast networks, affiliates and other broadcast groups to follow suit?

Retransmission consent is a crisis created by the intersection of federal rules (network non-duplication) and law (the retransmission-consent law), and the greed of the networks that since 1992 have sought to consolidate programming to leverage for financial gain at consumer expense. This problem will not go away until the FCC or Congress steps in to reverse their outdated policies of the past, which are harming consumers in the present, or until all broadcast networks, affiliates, groups and industry representatives step up to provide serious and legitimate marketplace reform.

Anything else is just political window-dressing.