Sinclair is locked in dispute on fees

Md. broadcaster threatens to pull stations from air

cable company payments at issue

December 01, 2006|By Andrea K. Walker | Andrea K. Walker,Sun reporter

Sinclair Broadcasting Group is threatening to pull television stations from the air in Iowa and other states because it doesn't think the cable company in those areas is paying it enough, the latest salvo in a burgeoning battle among broadcasters nationwide over transmission fees.

Sinclair is at odds with cable system owner Mediacom Communications Corp. over how much airing local stations is worth.

Mediacom said late yesterday that it reached an extension with Sinclair to avoid a midnight deadline that would have pulled the stations from cable systems in the Midwest and South. The new deadline is Jan. 5. Negotiations over the dispute will continue, Mediacom said. The move could leave some Midwest and Southern cable systems this weekend without some NFL football games, which that air on Fox affiliates.

Traditionally, cable companies have paid nothing or very little to air the local affiliates of ABC, NBC and Fox, arguing that these networks are available over the airwaves for free, so they shouldn't have to pay premium prices for them.

But Hunt Valley-based Sinclair, one of the largest independent owners of television stations nationwide, and other broadcasters have been pushing back, arguing that the cable companies have been essentially reselling their programming to cable subscribers. It's an issue that many cable companies and broadcasters have fought over.

Sinclair has been at the forefront of many of the disputes. Last year, it entered a battle with Comcast Corp. because it wanted to charge the company to carry its digital signal. The dispute angered many Baltimore-area cable subscribers who almost were kept from watching the Super Bowl on high definition televisions they bought exclusively for that day. The disagreement was settled, although neither side would release financial details.

Mediacom carries local Sinclair stations in a variety of areas including Des Moines, Ames and Cedar Rapids, Iowa; Peoria, Ill./Bloomington, Ind.; Lexington, Ky.; Madison, Wis.; Nashville, Tenn.; Minneapolis; Springfield/Champaign/Decatur, Ill.; St. Louis; Tallahassee, Fla.; Birmingham, Ala.; Norfolk, Va.; and Milwaukee. The pullout would affect 700,000 subscribers.

"Just because the stations are free over the airwaves, Mediacom has no more right to carry that channel than they do ESPN or any other cable channel," Sinclair general counsel Barry Faber said during a conference call to discuss the issue yesterday.

Neither company would disclose how much is at stake. Sinclair has said Mediacom's offer is below market value, while Mediacom's argues Sinclair's requested fee is too high.

Typical fees

Faber said yesterday that the ESPN network is typically paid $2.91 per subscriber by cable companies. TNT takes in about 89 cents per subscriber and Disney is paid 79 cents per subscriber. Sinclair is asking for less than what all of those networks get, Faber said.

Sinclair and other broadcasters have been arguing for higher fees in part because of the growth in high-definition television. The broadcasters want to recoup expensive investments they've made in digital signals, analysts said.

It can be a good bargaining tool because high-definition viewers are a coveted audience for cable companies because they spend more money for those services. Broadcasters are also looking for additional revenue streams as they compete with new forms of media, such as the Internet, for advertising.

But it is rare for a broadcaster to pull its channel because there is too much at stake for both sides, analysts said.

"It's a disaster for both parties if they don't come to an agreement," said Josh Bernoff, principal analyst with Forrester Research. "A cable provider without a major broadcaster is at a serious disadvantage. A broadcaster without a cable provider is at a serious disadvantage.

Minimal impact

Sinclair acknowledges that it could lose some advertising and viewers, but said the impact would be minimal. Television viewers can access the company's stations with an antenna or switch to satellite television, Sinclair executives said.

Some of Sinclair's stations broadcast several popular shows and the company believes people will find a way to watch them, Faber argued. Fox airs some NFL football games, American Idol and 24. CBS is home to CSI: Miami. The CW network airs America's Top Model.

"People are not going to say, `You know what, I used to watch NFL football every Sunday and now I'm not going to,' " Faber said. "They're either going to switch to satellite or use an antenna."

Nasty dispute

The dispute between the two companies has turned nasty in recent days with Mediacom accusing Sinclair of using "bullying tactics." Faber said yesterday Mediacom is portraying itself as a "white knight" and Sinclair a "villain."

Mediacom has encouraged its subscribers to write federal lawmakers and call Sinclair headquarters. Sinclair has offered to pay for vouchers for cable subscribers to switch to DirectTV.

Sinclair wouldn't be the first to pull a station over fees. In 2002, Cablevision stopped airing Yankees games in New York after a break down in talks over fees with the YES Network.

andrea.walker@baltsun.com

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