On TV:

Cable impasse

Broadcasters say pay up for local fare, but cable operators aren't budging

January 21, 2007|By Hanah Cho | Hanah Cho,Sun reporter

The bitter standoff that left cable subscribers in the Midwest and South without the NFL playoffs and American Idol this month could eventually spill into the living rooms of television viewers across the country.

It's part of a burgeoning battle between cable operators and broadcasters that's been brewing for 15 years but now faces its biggest test yet. At issue is whether cable operators will pay for something they've always received free: local television news broadcasts and the network affiliations that come with them.

Local network programming has been available for free over the airwaves since the signals came by way of rabbit ear antennas. And when cable began growing in the late 1970s and early '80s, local television stations and the network affiliates that came with them became staples in cable lineups at no charge.

That arrangement was status quo for decades. Cable operators wanted to give their customers local stations they were familiar with while also persuading them to pay for a host of new channels like MTV and ESPN. In exchange, local broadcasters expanded their reach through cable, which meant more people could see the advertising sold on local network affiliates.

Their relationship began crumbling a few years ago when competitors such as satellite television providers began paying broadcasters for the local content. Coupled with an eroding advertising base because of an increasingly fractured media, broadcasters such as Hunt Valley-based Sinclair Broadcast Group now insist that cable operators pay for local content or lose the channels. Cable systems - which have seen their stranglehold on paid television erode during the past few years - say it's not fair to charge them for what they always received free.

The stalemate could leave more cable subscribers without their favorite programs, raise prices for cable television and force viewers to fiddle with those TV rabbit ear antennas again.

Sinclair, one of the nation's largest owners of independent television stations, pulled channels like Fox and ABC this month from cable systems in Des Moines, Iowa, and Pensacola, Fla., among others. Sinclair couldn't agree with cable operator Mediacom Communications Corp. on a price to air those stations. It has left some 2 million viewers without popular shows on their cable systems. And it has become a closely watched dispute since Sinclair and other broadcasters are negotiating with several cable companies over similar fees, including in the Baltimore area.

A 1992 federal law that was designed to spur more competition in the cable industry, create added consumer protection and protect local programming planted the seeds of this industry battle.

The 1992 law prohibited cable companies from carrying local stations without permission and gave broadcasters an opportunity every three years to negotiate for fees, advertising time or additional channel access.

"The reality is that the cable business was built on the backs of local broadcast signals, and we don't think it's unreasonable for broadcasters to be modestly compensated for value programming like a Lost, a 24, and the Super Bowl," said Dennis Wharton, a spokesman for the National Association of Broadcasters, a trade group in Washington.

But only in the past few years have broadcasters sought cash from cable companies. The market landscape has shifted in broadcasters' favor as cable operators face competition not only from satellite providers but telephone companies also delivering television signals.

Cable operators aren't budging. They argue negotiations are increasingly reaching impasses because of broadcasters' demands, ultimately hurting customers. As a result, some in the cable industry are calling for reforms in the so-called retransmission consent rules.

"The spirit of the [1992 cable] law was to protect the local voice of the local broadcaster in the local market," said Amy Cohn, executive director of public affairs for Atlanta-based Cox Communications, the nation's fourth-largest cable provider. "While it sounds good on paper, it's been distorted."

Still, with financial pressures mounting, broadcasters are pushing harder for the fees, analysts say. (Tribune Co., the parent of The Sun and more than 20 television stations, declined to comment.)

CBS, for instance, said it is inevitable that the network would receive cash for its content. Leslie Moonves, president and chief executive officer of CBS Corp., told analysts this month that the company is negotiating with three cable operators and could eventually earn "hundreds of millions" in retransmission fees in 2009.

"The trend has been increasing for broadcasters to dig in and fight for those revenues," said Robin Flynn, an analyst at Kagan Research, a media research and consulting firm.

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