Retransmission Consent negotiations continue to be in the news as broadcasters and pay-tv operators square-off to present their cases to the FCC why current rules should stay as they are, or be revamped to consider current economics and market conditions that create opposite interests, and therefore threaten to disrupt consumer access to high profile programming at the most critical times. If you ask me, this is nonsense of scale. Nonsense, in reference to how this has been allowed to proliferate in the market, and Scale, referencing the size and scope of the problem.
Is it not rocket science, but a regulatory imbalance, which has morphed into headlines of consumers “caught in the middle” of economic debauchery as Cable TV Operators and Broadcasters slug it out in high-profile news outlets for the upper-hand in negotiations? What’s at stake, $1.1 Billion currently and up to $3.6 Billion within the next five years? That is a lot of cash being redistributed via current Retransmission Consent Rules and it’s attracted the attention of broadcasting parent networks wanting a substantial “piece of the pie”. See (Networks Want Slices of a New Pie)
Negotiation Process is Broken
Obviously, when the FCC created these rules, letting broadcasters choose must-carry or negotiate for carriage rights, the telecommunications landscape was very different. Pay TV Operators were not paying for broadcaster carriage rights and local affiliates and their parent networks were not compensated for unique programming, as were their cable programmer counterparts. Retransmission Consent Rules repaired a perceived inequity, and for many years broadcasters and Pay TV Operators negotiated in good-faith to satisfactory conclusions.
In recent years, as broadcasting revenues declined and cable programming grew both in quality and market coverage, broadcasters began looking for additional revenues to prop-up budgets, “bleeding in red-ink”. Henceforth, tougher and more demanding negotiations began to appear at each contract period to step up revenues to fill a void. Broadcast Networks began to take notice demanding an increasing share of those fees from local affiliates. See (Pay TV, Broadcasters Firms File Responses in FCC Retrans Rules Review)
No-Holds Barred, Free-For-All
The result has increased the stakes of these negotiations to the point where a “no-holds-barred free-for-all” is now the norm and not the exception. Recent stand-offs have produced disruption of high profile programming at critical times in consumer viewing. The timing of negotiation periods seem to coincide with these events, therefore creating undue leverage and market dominance in contract renewals. Pay TV Operators trying to hold costs down, while Broadcast Networks use any advantage to extract their perceived worth.
This process is broken and unless rectified by the regulating authority, the FCC, it will continue to be a “wild-wild west” of who blinks first, leaving the consumer to dangle in black-outs and outrage. Succinctly, consumers already consider payments for Pay TV programming to be at an all-time high and current rules threaten to drive those costs even higher. It does not bode well for an administration wanting to increase broadband proliferation, which is usually packaged with Cable TV products, to have incremental costs skyrocket due to competing industry rules that are, at best, archaic based on their 1992 original inception. In essence, consumers feel trapped in a process of no competing choices in broadcaster demands. See (Retransmission Consent Rules)
The FCC, as it is charged to do, should impose a moratorium on black-outs and enforce some type of arbitration of which both parties should be required to adhere during these periods. Both local and external markets should be considered separately in negotiations and not denied access to programming based on how many duplicate stations are present. Negotiations should be fair and equitable and not include market dominate broadcaster groups holding leverage over both Pay TV Operators and Local Affiliates to extract absorbent fees. Retransmission Consent Negotiations should not be tied to high-profile events or programming time periods.
It is time to convert nonsense into common sense in contract negotiations by reformulating outdated rules to coincide with current day economics. The FCC should, “step up to the plate”, and redesign such a regulatory mess.