Sinclair, Comcast reach deal

But they differ on what is being paid to retransmit programs

March 10, 2007|By Hanah Cho | Hanah Cho,Sun reporter

Cable customers in the Baltimore region and several other markets can still watch American Idol on their cable system but the battle over how to pay for such programming continued yesterday despite a new four-year agreement between Sinclair Broadcast Group and Comcast Corp. to carry Fox and CW affiliates.

Financial terms of the deal were not disclosed, but both companies insisted each stood its ground in a growing fight over so-called retransmission fees. The battle garnered nationwide attention because of its potential impact on cable rates and other factors across the television industry.

The agreement allows Comcast to carry analog and digital signals of Hunt Valley-based Sinclair's 37 stations - including Baltimore's WBFF-Fox 45 and WNUV-CW 54 - in 23 markets from Tampa, Fla., to Pittsburgh to Flint, Mich. Most of the stations are Fox, CW and MyNetworkTV affiliates.

Sinclair, which has been leading the industry in arguing that cable operators essentially resell its programming, said yesterday that Comcast is paying cash for the right to retransmit its broadcast signals. Comcast - the nation's largest cable provider - quickly rebutted that, saying it was trading advertising and other services to carry the stations.

"We don't do deals where we don't receive consideration for our retransmission consent," said Barry Faber, Sinclair's vice president and general counsel. Faber served as Sinclair's chief negotiator. "Consideration for us is cash," he said.

Philadelphia-based Comcast insisted it is not paying cash for Sinclair's programming, which is available for free over the airwaves. Comcast said doing so would raise rates for its customers.

"Comcast has achieved its objective of not paying cash for broadcast carriage that would need to be passed onto our customers," Comcast Executive Vice President David Cohen said in a statement.

Hours after the deal was announced, Sinclair increased its revenue estimate for retransmission fees from $48 million to $53 million this year. The company said the new projection includes terms from its deal with Comcast and smaller cable companies.

The deal came a day before the former contract was to expire and Sinclair could have forced Comcast to black out the network-affiliated stations it owns. Though such a move is rare, Sinclair exercised such an effort in January by forcing a smaller cable provider to remove Sinclair stations from cable systems in the Midwest and South while a deal was negotiated.

For decades, cable providers have picked up local broadcast signals without paying cash. Cable operators compensated broadcasters in other ways.

For instance, cable operators agreed to pay to carry NBC Universal's new channels such as MSNBC while retransmitting NBC stations for free. Companies such as Sinclair typically received advertising slots or better channel locations on cable systems for the free signals, or cable companies agreed to buy advertising from broadcasters.

Recently, station owners like Sinclair have been pushing back, arguing that their programming is more popular than some channels cable operators pay for.

With cable operators facing increasing competition from satellite and telephone companies delivering television signals - both of which pay broadcasters for the local signals - some analysts and industry experts have suggested a shift in the battle.

Talks watched

And because of Comcast's size and influence, and Sinclair's success in collecting cash for its programming from others, these latest negotiations were watched closely across the industry because of its potential to set a precedent for future deals.

Sinclair has begun negotiations with Atlanta-based Cox Communications Inc. and Charter Communications Inc. about similar fees.

But Cohen, of Comcast, said yesterday that nothing has changed.

"I would say that those who have looked at what has been recently occurring in the retransmission world and predicting that a sea change was occurring have dramatically overstated the reality," Cohen said.

Under the deal, Cohen said, the two companies are exchanging "comparable value" that involves advertising, marketing and promotions. He added that the new agreement is similar to the former contract where "we were paying money and receiving back advertising and marketing support" that was comparable in value.

While Faber acknowledged that Sinclair is providing advertising and other services to Comcast, he said the fees the cable company is paying for the channels outweigh other costs.

"We don't enter into retransmission deals without receiving compensation for retransmission that's above and beyond anything else we provide in the deal," Faber said.

Some analysts believe Sinclair is receiving some cash despite Comcast's insistence otherwise.

"Comcast maintains that they don't pay cash compensation for retransmission deals, but given that [Sinclair] has received cash in some of its recent retransmission consent agreements with other cable companies, we believe it is possible that some part of compensation could be in cash," John Blackledge, an analyst at J.P. Morgan Securities who follows Sinclair, wrote in a research report yesterday.

A precedent

Marci Ryvicker, a senior analyst at Wachovia Capital Markets who covers Sinclair, said the deal between Comcast and Sinclair has set a precedent in the growing battle over retransmission fees.

"It makes retransmission cash payments more of a de facto. This is happening. This isn't what if," she said.

The Comcast and Sinclair deal, Ryvicker said, "was the big agreement that had to be made in order to figure out how much leverage the broadcast groups actually have."

hanah.cho@baltsun.com

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