NAB Chief Forecasts Cash for Retrans

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Las Vegas— With cable operators facing ongoing competition from direct-broadcast satellite providers and, increasingly, from telephone companies, local TV stations can ultimately expect market pressure to force cable to pay cash for access to their over-the-air signals, National Association of Broadcasters president David Rehr said here last Monday.

“Satellite and telephone companies already recognize that they must compensate broadcasters … eventually. So must cable — especially as its own competitive position weakens. Frankly, it’s only a matter of time,” Rehr said, addressing his first NAB convention since assuming the presidency last December.

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Since 1992, TV stations have been allowed to seek compensation for their signals. Many broadcasters opted to launch cable channels for which they received license fees from operators, after those companies balked at paying cash for programming that is distributed for free.

Rehr said TV stations deserved payment because their programming is highly valued by cable subscribers.

“In the 2004-2005 TV season, broadcasters had the top 255 highest-rated programs. Cable’s most popular show came in way down at 256,” he said.

Rehr’s 20-minute speech, which outlined a number of industry initiatives, was interrupted once by applause when he said the “NAB must move from an organization that is perceived as being on defense … to one that is on offense.”

Facing their own economic pressures, TV stations are now looking to create the dual revenue stream — advertising and subscription revenue — that has underpinned cable networks for decades. Many TV stations are motived to seek cash because they are losing revenue that was once supplied under their network affiliation agreements. Some need the money to run analog and digital facilities until the shift to all-digital broadcasting is finished, expected by Feb. 17, 2009.

“Broadcasters are bleeding. We have to stop running two simultaneous feeds,” said Jerald Fritz, Allbritton Communications Co.’s senior vice president of legal and strategic affairs. Allbritton owns ABC affiliate WJLA in Washington, D.C.

TV stations negotiate for cable carriage every three years under the process called retransmission consent. Small cable operators in particular have complained the process is being abused when access to local-TV signals is tied to carriage of cable networks with corporate ties to broadcasters. The American Cable Association, a consortium of small operators, has argued that the bundling practice drives up cable rates and forces carriage of programming that subscribers may not want.

“Retransmission consent harms consumers, forces up prices and takes away more programming choices for consumers,” said ACA president Matt Polka, who hopes Congress passes a law this year that will rein in TV stations.

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Among other things, ACA has asked for permission to import out-of-market TV stations if retransmission-consent talks break down, as well as the right to purchase broadcaster-owned cable networks on an unbundled basis. Although House legislation is not expected to address these two issues, a Senate bill sponsored by Sen. Ted Stevens (R-Alaska) might, Polka said.

In his speech, Rehr did not use the phrase “cash for carriage,” but he implied it in stating that greater competition among pay TV distributors would mean that TV stations “will have more revenue streams from the content we provide.”

Rehr said that Polka’s organization was “attempting to use [its] special interest influence to change the level playing field of the current retransmission consent process.”

In terms of promoting cable competition, Rehr indicated that the NAB would not oppose new legislation that would ease phone-company entry into cable markets through the removal of the local-franchising requirement.

“NAB believes that the telephone companies should be able to compete fairly with cable in offering broadcast programming,” he said, before returning to the issue of compensation. “To be a competitive player, the telephone companies will have to offer local content. Local content is us, and we will be compensated for that.”

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