Retrans in a Changing World

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Following is an excerpt from Federal Communications
Commission chairman Julius Genachowski’s
address to the National Association
of Broadcasters convention in Las Vegas last
Monday (April 16).

The world is changing, and stations

that have been investing in online and
other digital platforms are seeing accelerating
usage and revenues.

Online ad revenues for TV stations have
crossed the $1 billion-a-year mark, at $1.2 billion
for 2011, up almost one-third over the last
three years. And analysts expect the rate of
growth to continue to accelerate in 2012.

Why the positive revenue trends for many broadcasters?

First, of course, economic recovery is helping broadcasters.
After a brutal recession, we’ve seen 10 straight quarters
of GDP growth, and the private sector has added jobs for 24
consecutive months.

Broadcasters are benefiting not only from general economic
recovery, but from specific initiatives like the rescue
of the auto industry. …

A second reason for the positive broadcaster revenue
trends: New retransmission-consent fees are giving many
broadcasters a meaningful second revenue stream.

As you know, the FCC’s approach so far on retrans has
generally been to resist calls for agency intervention and
encourage private, market-driven agreements between
broadcasters and cable and satellite providers. The basic
view is that it is both economically sensible and consistent
with the statutory scheme for broadcasters that have
invested in desirable programming to seek and receive
retransmission fees.

But the calls for agency intervention continue. The cable
industry points to historical benefi ts that broadcasters have
received from government, and argues strongly
that these give broadcasters an unfair advantage
in a marketplace that has changed significantly
since the retransmission-consent law was adopted.
Consumer groups and others are concerned
about effects on consumers and on independent
cable programmers.

We opened an FCC proceeding because these
are important issues, and we continue to watch
the marketplace carefully to determine whether
further commision action is warranted.

A third reason for positive economic trends
among many broadcasters: Broadcasters are increasingly
pursuing innovative strategies to take
advantage of the multiplatform digital broadband world. …

Now it’s true that not all broadcasters are adapting
to this changing world, or that they even can. And analysts
agree that prospects aren’t equally bright for all

About 40% of TV stations are not receiving retransmission-
consent fees, and aren’t likely to — there are many
more stations than broadcast networks, particularly in
larger markets.

Local stations like KABC can provide specialized coverage
of “Carmageddon” on broadband devices because they
have a news division creating original local content. Most
broadcast stations in Los Angeles don’t.

And that’s true more generally. Many stations don’t have
local news and content-creation operations that they can
leverage over multiple broadband platforms; and on a percentage
basis, that’s also particularly true in the larger markets.
The economics are the economics.

The good news is that the new voluntary incentive auctions
law presents an unprecedented opportunity for
broadcasters like these and others to improve their financial