Sinclair clash may lead to larger cable fights

January 09, 2007|By Hanah Cho | Hanah Cho,SUN REPORTER

Thousands of cable customers in the Midwest and South remained without networks such as Fox and ABC yesterday in a dispute that could determine how much consumers pay for local television on cable systems nationwide.

Hunt-Valley based Sinclair Broadcast Group pulled 22 local stations it owns from cable systems in several states this weekend after negotiations failed with a New York cable provider on a price to air the local content. Mediacom Communications Corp., which owns the cable systems in markets such as Des Moines, Iowa, complained that Sinclair's fee was too high and paying it would force other cable providers to follow suit.

The dispute left some of the 700,000 cable subscribers in 13 states without the NFL playoffs this weekend and the championship college football game last night. Popular shows such as the Simpsons and Desperate Housewives also were lost on some cable systems.

FOR THE RECORD - Television networks such as Disney, TNT and ESPN are paid by cable companies between 79 cents and $2.91 per subscriber, according to Sinclair Broadcast Group executives. An article about a dispute involving Sinclair and Mediacom Communications Corp. in The Sun yesterday contained incorrect information.
The Sun regrets the errors.

The dispute is rattling the cable and television industry, which has for years fought over the costs of airing local programming.

Broadcasters such as Sinclair insist they should be paid for providing content that cable systems charge consumers a premium to receive. Traditionally, cable companies have paid little or nothing to air the local affiliates of ABC, NBC and Fox, arguing they should not have to pay for channels that are available for free over the airwaves.

Industry analysts said Sinclair's decision to pull the stations is one of the biggest tests yet for the industry and could set the tone in future negotiations involving local station costs nationwide. Sinclair also is in contract talks with cable providers such as Time Warner Cable and Comcast Corp., which said Baltimore viewers could lose local Fox stations in March under a similar dispute.

Sinclair is "taking an extraordinary stand, and they're trying to lead or drag the rest of the broadcast industry into taking the stand," said Steve Effros, a Washington-based cable industry analyst and consultant. "They're certainly raising the stakes, and they're certainly raising people's awareness that free television is not considered free by the people who have the licenses."

Over the weekend, Mediacom officials provided thousands of free antenna kits in Des Moines and Cedar Rapids, Iowa, where there are 250,000 subscribers. Demand was so high that the company ran out of the rabbit-ear antennas, which help televisions pick up the networks from the free airwaves.

And to appease college football fans, Mediacom said yesterday that it planned to provide public places for customers to watch the BCS Bowl championship game between Ohio State and the University of Florida. Screens were set up in places such as the U.S. Cellular Coliseum in downtown Bloomington, Ind.

Mediacom executives say Sinclair is using the cable company as a pawn in a game to set industrywide prices. Mediacom's estimates of such fees proposed by Sinclair could raise cable rates by $6 billion annually.

Sinclair is "using Mediacom to set the stage for the entire cable business and for their negotiations with Time Warner and other cable operators," Mediacom Chairman and Chief Executive Officer Rocco B. Commisso said in a conference call yesterday.

Sinclair, one of the largest independent owners of television stations nationwide, has been at the forefront of the push to have cable operators pay to retransmit local stations and networks. Barry Faber, vice president and general counsel of Sinclair, did not return telephone calls yesterday.

Yesterday Mediacom appealed last week's decision by the Federal Communications Commission's media bureau to reject the company's complaint that Sinclair did not negotiate in good faith. The panel, however, "strongly encouraged" the two parties to enter binding arbitration, an option that Mediacom said Sinclair is rejecting.

During the past several years, cable companies and broadcasters have fought over payments. While threats to pull the programming from cable systems are common, it's rare for companies to stop transmitting content. Most companies agree to extend contracts while negotiations continue.

But some broadcasters have pulled programming when disputes could not be reached. For instance, Northwest Broadcasting Corp. in December pulled Fox stations on Time Warner Cable in three states when the two couldn't reach an agreement, according to Broadcasting & Cable, a trade publication.

This weekend's stalemate between Mediacom and Sinclair moved the issue to a larger scale.

"The retransmission consent issue, in general, has became a means of leveraging over-the-air broadcasters' market power to obtain concessions from the cable industry," said Andrew Jay Schwartzman, president and chief executive of the Media Access Project.

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