Comcast viewers face cutoff

Sinclair may halt TV programs to cable giant tomorrow if talks fail

February 28, 2007|By Hanah Cho | Hanah Cho,SUN REPORTER

To collect cash for its television programming, Sinclair Broadcast Group Inc. played hardball last month by pulling its stations from cable systems in the Midwest and South and sending a strong message to the industry that its payment demands are serious.

The stakes are higher for the Hunt Valley broadcaster in a fight to obtain similar fees from Comcast, the nation's largest cable operator and the biggest player in the Baltimore area.

A source familiar with the negotiations said yesterday that Sinclair is prepared to cut off its programming to Comcast systems at 2 a.m. tomorrow because talks between the two sides have stalled. Negotiations are expected to continue today.

Pulling the stations would mean viewers in the Baltimore region and elsewhere would not be able to watch popular shows such as American Idol, 24 and Gilmore Girls on their cable systems.

That's because without a deal, Sinclair could order Comcast to remove 30 network-affiliated stations - including Baltimore's WBFF-Fox 45 and WNUV-CW 54 - from cable systems that reach 3 million customers in 23 markets from Tampa, Fla., to Pittsburgh.

Denying the stations to Comcast means Sinclair could lose a lot more than it did the last time it made a similar decision, particularly advertising revenue in some key markets, industry analysts and observers say. But Sinclair is known for its unpredictable nature, so few are predicting the outcome.

"Given their scale, [Comcast has] the economics and influence," said John Blackledge, an analyst at J.P. Morgan Securities, who covers Sinclair. "It'll be interesting to see" how the negotiations turn out.

Comcast said yesterday that "it will continue to offer Sinclair's broadcast stations unless they demand that those stations be removed."

"Our first goal is to protect our customers from being charged extra for free TV," said Comcast spokeswoman Jenni Moyer.

The showdown is the latest salvo in an increasingly loud and bitter battle pitting station owners against cable operators.

Sinclair has been at the forefront of demanding cash to retransmit its stations's content, arguing that cable companies should pay for popular programming that they essentially resell to customers. Comcast, like other cable companies, traditionally have not paid retransmission fees. Cable operators maintain they should not pay for channels like NBC, ABC and Fox that are available free over the airwaves.

But CBS announced last week that nine smaller cable operators agreed to compensate the network for the right to carry its programs, including the NCAA basketball tournaments and shows such as CSI.

CBS did not say whether cash was involved or name the cable companies, but Chief Executive Officer Leslie Moonves has said publicly that the network would seek payments for its content.

"At the end of the day, these ... negotiations boil down to who could cause whom the most pain," said Craig Moffett, a senior analyst of U.S. cable and satellite broadcasting industry at Sanford C. Bernstein & Co.

When talks over a price failed with Middletown, N.Y.-based Mediacom Communications Corp. in January, Sinclair pulled more than 20 local stations it owns from the cable operator's systems, including in Des Moines, Iowa. The impasse left 700,000 customers without popular shows such as the Simpsons and Desperate Housewives.

Nearly four weeks later and two days before the Super Bowl, Mediacom "caved in to their demands," Mediacom Chairman and Chief Executive Officer Rocco B. Commisso said last week during a conference call with analysts.

Financial terms of the deal were not disclosed, but Mediacom said it is paying to carry Sinclair's stations for the first time.

Mediacom executives said Sinclair used its leverage to hurt the cable operator: The blackout affected half of Mediacom's 1.4 million cable subscribers while affecting only 3 percent of Sinclair's viewing audience.

Both sides lose when signals are shut down. Subscribers can drop cable service, while viewers and advertisers can abandon television stations.

Mediacom said last week that it lost 7,000 basic cable customers in the final three months of 2006, during which Sinclair threatened to pull its programming. Mediacom said it lost additional subscribers when Sinclair stations were not on the air last month.

Sinclair executives said recently that what the company lost was "immaterial" compared with what it got in return from Mediacom. Sinclair said viewers would find other ways - either by using an antenna or switching to competitors - to watch its programs.

Overall, the company expects to double to $48 million this year revenue it receives from cable operators and others who pay to retransmit its television signals.

Analysts say Comcast, with some 24 million subscribers, has more leverage in its talks with Sinclair because of its size compared with Mediacom.

For one thing, the affected Sinclair stations are in markets with larger viewership such as Pittsburgh, Baltimore and Nashville, Tenn.

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