Disneys Retrans Clout Comes to SoapNets Aid

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The Walt Disney Co. is playing hardball with some cableoperators over its new SoapNet channel, telling two small systems in Illinois that theycan't continue carrying the signal for ABC's Chicago TV station unless they add thesoap-opera network to their lineups.

The retransmission-consent flap involves two cable systemsthat are in rural areas but still lie within the Chicago DMA, according to Matt Polka,president of the American Cable Association, which represents 300 independent cableoperators serving 2.5 million homes.

Those two Illinois cable systems need to renew theirretransmission-consent deals in order to continue carrying the signal of WLS-TV, which isowned and operated by ABC Inc., a unit of media giant Disney.

Disney, of course, also has a stable of cable networks, andit is looking to launch a new one -- 24-hour soap-opera channel SoapNet -- in January.

Cable operators have previously reported that Disney islooking to exchange cable carriage of SoapNet in return for retransmission consent for itsABC television stations.

But the situation in Illinois showed for the first timethat Disney is being quite aggressive in its push to get SoapNet distribution, and thatcable operators aren't happy about it.

"I call it blackmail," said Skip Kraus, owner ofManhattan Cable TV, a mom-and-pop system that's located 38 miles outside of Chicago."It's being jammed down our throats."

Officials at the second small cable system threatened withlosing WLS-TV's signal could not be reached for comment.

Polka in particular is crying foul on behalf of hisconstituents. He claimed that the latest round of retransmission-consent agreements isbeing used -- by media conglomerates with both broadcast and cable holdings -- to forcesmall cable operators to carry new cable networks that subscribers don't necessarily want.

"[Small operators] have limited channelcapacity," Polka said. "They want to put on a known service. Now they must puton a brand-new, untested service, SoapNet."

Said Kraus: "My customers don't know a thing aboutthis channel."

And down the road, if digital must-carry is in factrejected by Washington regulators, Polka said, he fears that broadcasters will useretransmission consent as a substitute way to force small, channel-locked cable systems totransmit the digital-broadcast signals of their TV stations.

"There is nothing to regulate retransmission-consentdeals," he said. "It's a back-door way for broadcasters to get digitalcarriage."

In the case of WLS-TV and SoapNet, the two small Illinoiscable systems can ill afford to drop the Chicago TV station, since it would most likelyspark an angry outcry from their subscribers, Polka said.

This means that they don't have much choice but to carrySoapNet, which will air same-day replays of popular ABC soaps such as All My Children,General Hospital, One Life to Live and Port Charles.

When it debuts next year, SoapNet will face stiffcompetition from another 24-hour soap-opera channel, Sony Corp.'s SoapCity.

SoapCity has secured the rights to do same-day repeats ofshows such as CBS' The Young and the Restless.

Kraus said that about three weeks ago, his Disney Channelaffiliate-sales representative told him he would not get retransmission-consent renewalfor WLS-TV unless his 3,500-subscriber system starts carrying SoapNet when it launches inJanuary. His old retransmission deal expires Dec. 31.

"I'm so small, I can't fight this," Kraus said."We're channel-locked at 50 channels. But it's not fair to your customers to take offWLS."

In addition, Manhattan Cable will have to buy and install anew satellite dish that faces and takes signals from the satellite SoapNet will be on --another added expense.

"I'm going to have to raise my rates to cover thesecosts," Kraus said. "Then Congress starts screaming when we raise rates."He maintained that the only solution is for Congress to step in and regulate programmers.

"Smaller, independent cable companies have no leverageand, unfortunately, some programmers take advantage of this," Polka said.

When asked about retransmission consent last week, a WLS-TVspokeswoman said, "The station is not negotiating for this. It's being done by DisneyChannel."

A Disney Channel spokeswoman declined to comment, andofficials at Disney/ABC Cable Networks couldn't be reached for comment.

"It's another situation where it gets down to: Howdoes the independent cable operator negotiate with these mega-media conglomerates?"Polka said.

It's nothing new for giant media companies to useretransmission consent as a bargaining chip to secure carriage for new cable networks.That's how ABC Inc., which is now part of Disney, got ESPN2 launched several years ago.

And right now, in Columbus, Ohio, a broadcast company islooking to exchange retransmission consent for its CBS affiliate, WBNS-TV, in exchange forcarriage of its local cable-news channel, Ohio News Network. Time Warner Cable is balkingat that particular deal.

But Polka sees problems getting worse for small operatorsas media consolidation continues. For example, he cited the pending merger of Viacom Inc.,with its MTV Networks division, and CBS Corp., with its owned-and-operated TV stations.

MTVN has a history of bundling its highly demandednetworks, such as Nickelodeon, with its newer ones, like TV Land and VH1, to increasedistribution for the newer, less popular services.

After the CBS-Viacom merger, MTVN could try to get carriagefor any new cable network it's launching by tying it to retransmission consent for CBSstations, according to Polka. "We'll see more of the same," he added.

If the Federal Communications Commission nixes digitalmust-carry, Polka said, he expects broadcasters to use retransmission consent as a"back door" to force cable operators to carry their digital signals.

And smaller cable systems not only don't have the channelcapacity to carry such digital signals, but they don't have the headend equipment to passthem through, according to Polka. Headend upgrades would be financial burdens to smallsystems, on top of the loss of channel space, he added.

In the future, the ACA might file a petition of rulemakingwith the FCC to try to prevent broadcasters from using retransmission consent in exchangefor digital carriage, Polka said.

"These retransmission-consent agreements are notregulated, so cable operators are at the mercy of whatever the broadcaster put beforethem," he added.

In contrast to Polka's complaints and concerns, some cableoperators are all too happy to agree to carry broadcasters' digital signals in exchangefor retransmission consent, rather than having the government get involved in the process.

AT&T Broadband & Internet Services has done suchdeals with NBC for its 13 owned TV stations and with Fox Television Stations Inc. for its22 owned stations.

Polka is also concerned that those major MSOretransmission-consent deals, such as AT&T Broadband's, may have most-favored-nationclauses that will wind up being binding for smaller cable operators.

"If NBC goes to a rural operator in South Dakota orIllinois, it can't give them a better deal than AT&T got," Polka said.

At this juncture, the National Cable Television Associationhas taken a pretty hands-off approach to retransmission consent.

"We don't have much to do with retransmissionconsent," NCTA senior vice president of law and regulatory affairs Dan Brenner said."Cable companies have indicated that the retransmission-consent approach has allowedthem to add signals that customers want."

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