With the pay-TV industry’s continued effort to have Congress or the Federal Communications Commission change the retransmission consent process, here is a quick refresher with eight unassailable facts regarding the carriage negotiation process.
1.) Retransmission consent is the market-based negotiation process by which a broadcast station and cable operator negotiate the carriage terms of the broadcast signal. It has been a central element of communications policy since the provision was included in the 1992 Cable Act, a law that was designed to curb escalating cable rates and included a program access provision that jump-started the satellite TV business. The National Cable and Telecommunications Association (NCTA) and cable operators fought mightily to block the bill, but were unsuccessful. This was the only piece of legislation vetoed by President George H.W. Bush that Congress successfully overrode.
2.) It’s in the interest of both parties to reach a successful retransmission agreement. Cable operators want access to the highest-rated entertainment programming on television, along with local news, weather and sports offered by broadcasters. Broadcasters want their programming carried on as many platforms as possible.
3.) Cable profits have increased five times the amount of their programming expenses over a three-year period, according to a 2009 study. From 2003-2006, average gross profits for several cable operators increased from $48.96 per subscriber per month to $62.99 per subscriber per month, an increase of $14.03 per subscriber per month. During that same period, the cable operators’ programming expenses per subscriber per month increased from $15.63 to $18.47, an increase of just $2.84 per subscriber per month.
4.) While there have been a few high-profile negotiations, an impasse is exceedingly rare. In fact, there have been thousands of successfully completed retrans negotiations. Notably, an American household is about 10 times as likely to experience a complete cable system outage, and about 24 times as likely to experience an electricity outage, as it is to be deprived of its first-choice TV channel because of a retransmission consent dispute. (See 2009 study.)
5.) Vertically-integrated cable operators routinely pay carriage fees for the lower-rated cable networks they own, essentially transferring money from one pocket to the other. Time Warner-owned TNT received 99 cents per subscriber per month in carriage fees last year. Cablevision earns nearly one dollar per subscriber per month for Cablevision-owned networks like WE tv, IFC, Sundance, and AMC in carriage fees.(See SNL Kagan figures reported by WSJ.com’s All Things D.)
6.) Broadcast ratings vastly trump cable. During the 2009-2010 TV season, broadcast accounted for 302 of the top 312 television programs (96.7%), according to the Television Bureau of Advertising.
7.) In the 18 years since retransmission consent has been in effect, there has never been an adjudicated complaint at the FCC of any broadcaster refusing to negotiate in good faith under the retransmission consent principle. In fact, the only party that ever has been adjudicated of bad-faith negotiation by the FCC is a pay-TV provider, EchoStar.
8.) Consumers always have a choice. If their cable operator refuses to reach an agreement with their local broadcast station, the cable customer can bypass the pay-TV providers altogether by using an antenna to receive free, high-definition, broadcast TV. Or they can switch to a competing pay-TV service provider that values broadcast programming. Not surprisingly, Verizon FiOS — citing the importance of broadcast programming — has urged customers of competing pay-TV services to do just that.