If cable systems and broadcasters can play nice in retransmission negotiations and avoid blackouts that deny consumers their favorite programming, Congress will keep its hands off.
At the conclusion of the two-hour hearing before the Senate Subcommittee on Communications, Technology and the Internet, Sen. John Kerry (D-Mass.), chairman of the Subcommittee, told both sides to “think about it.”
Kerry promised to hold Wednesday’s (Nov. 17) hearing in the heat of the recent 16-day standoff between Cablevision and Fox, which resulted in 3 million Cablevision subscribers scrambling to watch some of the World Series and other Fox programming in New York and Philadelphia elsewhere. Though Kerry crafted draft legislation that would keep signals from being pulled during a dispute and use arbitration in extreme situations, that legislation is unlikely to go much further in the lame duck Congress.
But the hearing did serve the purpose of taking both Cablevision, represented by COO Tom Rutledge and News Corp., represented by Chase Carey, chairman, to the watershed.
“Think about what is the compromise mechanism,” said Kerry, who noted that all the companies at the witness table weren’t hurting for profits.
Sen. John Rockefeller (D-W.Va.), chairman of the full Committee on Commerce, Science and Transportation, was more blunt. He used the opportunity to dress down TV programming (he’s tired of both Fox News Channel and MSNBC). “If you fail to fix this situation, we will fix it for you,” Rockefeller said. “But when we do, we will seek to do more than referee your corporate disputes. Because more than just retransmission consent ails our television markets. We need new catalysts for quality news and entertainment programming. We need slimmed down channel packages that better respect what we really want to watch. And we need to find ways to provide greater value for television viewers at a lower cost.”
Listening to the witnesses Wednesday, it’s hard to believe either side will give an inch in their position. The arguments developed since 2007 when broadcasters first began asking for cash compensation, are now well entrenched. Everyone in the packed room could recite them. And like the very public and most contentious retransmission negotiations that once the hearing ended, those arguments continued in a flurry of press releases from the companies and organizations that have supported one side or the other.
Perhaps the newest twist in the tug-of-war between the cable companies that want reform and the broadcasters that don’t, was the argument from the cable side that the process is already regulated and therefore is not a free-market negotiation. (Cable companies can only negotiate with the local signal in the market, for example.)
“If broadcasters truly want to operate in a ‘free market,’ then they should give up these special privileges. But if broadcasters want to retain their special privileges, then the retransmission consent rules need to be updated to prevent broadcasters from using consumers to gain leverage in negotiations,” said Glenn Britt, chairman, president and CEO of Time Warner Cable.
Cablevision, Time Warner Cable and other retrans reform proponents believe that the Federal Communications Commission has the authority to step in and has petitioned the regulator to do so. But so far, the FCC, which was not one of the witnesses, has remained on the sidelines.
“The government created the problem, so only the government can fix it,” said Thomas Rutledge, COO of Cablevision, calling for the FCC to open up a rulemaking to examine retrans reform.
“This regulatory structure restricts our ability to grow our distribution. We simply cannot find the space because of bundling deals,” added Charles Segars, CEO of Ovation, an independent cable channel.
Broadcasters insist the process is working and that government intervention, even the threat of it, would make it worse. “[Cablevision] made it clear to us that their goal, instead, was to politicize the issue and interject the government into our private negotiations. No one should miss the fact that four of the disruptions that occurred in the programming marketplace this year involved one company: Cablevision,” Carey said.
Despite a handful of high-profile blackouts, most retransmission negotiations go smoothly, without incident, broadcasters argued. Univision Communications is a case in point. “As a direct participant in the negotiation of Univision’s deal, I can personally attest that we were able to do so because in every negotiation there are natural incentives for the parties to reach agreement,” said Joe Uva, CEO and president of Univision.
Without the fees providing a growing second revenue stream, broadcasters fear they would lack the necessary investment to bring more sports and news to local audiences. “Without reasonable revenues, broadcasters will simply not be able to compete with cable channels,” said Carey. “We have already seen an increase in sports migrating to cable[.]…Local news, which is very expensive to produce, could be eliminated entirely or become less local in nature.”