As Retransmission Fees Rise, Cablevision Proposes a Solution

By Alex Weprin 

One of the revenue lifelines being pursued by the broadcast networks are retransmission consent fees, monthly fees paid to local affiliates by cable companies much the same way cable networks get paid monthly carriage fees.

Of course, as networks seek out these retrans fees, the likelihood increases that consumers will pay more every month for their cable bill. SNL Kagan estimates that retrans fees will rise 28% this year to $1.46 billion, and could go to $3.61 billion by 2017. That is why the FCC is currently looking into the issue.

Cablevision has sent a proposal to the FCC that would help control costs… and it could have an averse effect on many smaller cable networks, including some news channels.

At the heart of their proposal is forbidding networks from tying small channels to the big “must-carry” channels. In Cablevision’s spat with News Corp. last year, the programmer demanded that Cablevision pay for Fox Business Network and Nat Geo Wild in order to also get the Fox broadcast channel. Likewise, NBCUniversal can mandate that its smaller channels be included in order to carry NBC.

In other words, if you want to get a network people actually want, you have to pay for networks that far fewer people are interested in.

The Cablevision proposal would also forbid keeping the prices of broadcast channels secret, and would not allow discrimination of prices based on size, among other factors.

“The days of secret pricing that, among other things, requires consumers to pay for additional cable channels before they can receive a broadcast channel should come to an end,” said Tom Rutledge, Cablevision’s chief operating officer in a statement. “Broadcasters should not be able to keep the prices they charge hidden or to discriminate between distributors in a given market. Our simple reforms would end these practices, and we urge the FCC to consider this consumer friendly approach.”

Another option being pushed by consumer groups is “a la carte” pricing, or letting consumers only pay for networks they want. The problem with that solution is that “retail” prices for networks would likely be far higher than the “wholesale” price the MSOs pay. HBO thrives by charging consumers $15 a month, but it is unlikely customers would want to pay more than one or two dollars for most cable channels, and that would not be enough for many of them to survive–at least in their current form.