ACA: Broadcasters squeezing small ops dry
Wielding data collected in the most recently concluded fiscal quarter, the American Cable Association has appealed once again to the Federal Communications Commission to prevent TV station conglomerates from squeezing small cable companies to elicit ever-higher retransmission consent fees.
The second fiscal quarter revealed the financial results of the retrans agreements that were renegotiated in the first quarter.
On a percentage basis, the numbers can be eye-popping – some broadcasters reported triple-digit increases in retrans revenue. In dollar terms, the figures may be modest by Wall Street standards, though still significant for many of the tiny operators represented by the ACA.
- Gray Television: Retransmission consent revenue up 394 percent to $4 million.
- Journal Communications: Retransmission consent revenue up 150 percent to $1 million.
- Meredith Corp.: Retransmission consent revenue up 75 percent (total N/A).
- Nexstar Broadcasting Group: Retransmission consent revenue up 68 percent to $7.9 million.
- LIN TV Corp.: Retransmission consent revenue up 67 percent to $10.2 million.
The ACA pointed out that small cable providers end up paying even more because small providers have a de minimis share of the market and can't afford to alienate consumers who expect to see broadcast content on their cable system. Broadcasters also get away with demanding high carriage fees from the smallest cable providers in the market because they know that lack of carriage won't affect their bottom line nearly as much as would denial of carriage by the market's largest pay-TV providers.
The ACA noted that SNL Kagan, a respected analyst of cable market trends, projects that retransmission consent revenue will reach $1.2 billion by 2011, more than double the $500 million paid in 2008.
ACA President and CEO Matthew Polka said: “The FCC needs to fix the shattered retransmission consent regime, stop programmers from demanding carriage within the most popular programming packages, and discipline Web-based content providers that block consumers' access to their services if the consumers' broadband access provider has refused to pay per-subscriber license fees to the content owners.”
The latter half of that statement refers to recent deals in which ISPs – both cable and telco – have agreed to pay ESPN to open access to the ESPN360.com Web site to their Internet subscribers; the ISPs offer access to ESPN360.com to their subs for free. While a Comcast or a Verizon can afford such arrangements, the ACA complains its members are not so lucky, putting them at a distinct competitive disadvantage. ESPN is owned by Disney.
"Disney's refusal to sell ESPN360 directly to consumers will raise the price of broadband and punish the pocketbooks of casual Web surfers who have no interest whatsoever in watching beach volleyball on a computer screen," Polka said.
If more and more Web-based content providers adopt the same model, the inevitable result will be an increase in broadband prices, the ACA contends.
… Which is why the ACA is separately objecting to A&E Television Networks’ acquisition of Lifetime Entertainment Services. The organization contends the arrangement will produce higher cable bills and mean less channel choice for consumers in rural America because the media conglomerates in control of A&E insist that small, independent cable providers consent to consumer-hostile pricing, terms and conditions.
"Media conglomerates Disney, Hearst and NBCU, which will take three-way control of Lifetime through their interest in A&E, use their market power to force small cable operators to pay unfair and unreasonable wholesale rates and distribute channels that their customers do not want included in their programming packages. A&E's takeover of Lifetime – call it Project Wrongway – will further enhance the power of media giants to discriminate against video consumers served by ACA members in thousands of rural communities," Polka said.