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A high-profile battle over fast-growing retrans fees, the new spotlight on digital rights and a more vocal FCC (particularly in the ownership caps arena) have the industry nervously looking ahead to see if expectations regarding retrans revenue growth may have to be adjusted, says an SNL Kagan Report.
The CBS/Time Warner Cable blackout, which began August 2nd, is now in its fourth week. The duration of the high profile dispute, involving more than 3 million multichannel subscribers, more than $3 million in monthly retrans revenue and millions more in affected advertising revenues, has upped the public debate about whether the system is broken and needs to be fixed. To date, despite publicly urging the two sides to come to an agreement, the FCC has not indicated any willingness to alter its years-long stance and change the current regulatory infrastructure or become involved in retrans disputes (unless either side alleges that the other party isn’t negotiating in “good faith”), meaning that rate-setting will be left up to the market for the foreseeable future under the current rules.
But the dispute is a milestone in the industry for more reasons than just the size and duration of the standoff. Other new elements that have emerged in the last weeks, such as the reported size of the retrans fees being asked (up to $2/sub/month), the importance of digital rights, the possibility of losing the affected TV station’s channel position and the willingness of large multichannel operators to hang tough even in major markets, have made this dispute one that may be cited as a turning point in the industry.
Another new element of the dispute: the fact that CBS blocked online access to its shows to Time Warner Cable broadband subs after TWC dropped it from its systems, even if they are not video customers. According to a statement issued by CBS, “If Time Warner Cable is a customer’s Internet service provider, then their access to CBS full episode content via online and mobile platforms has been suspended as a result of Time Warner Cable’s decision to drop CBS and Showtime from their market.” This move could be a precedent that is followed by other network O&Os involved in a retrans dispute with cable operators. In addition, the premium service Showtime was also dropped as part of the dispute — the first time that network has ever been dropped in a retrans blackout situation.
Interestingly, CBS and Verizon Communications Inc.’s FiOS said August 22nd they managed to come to a quick agreement on a new deal including almost the same terms that TWC was unwilling to accept, but that could be because: 1) FiOS’ s terms were likely higher to begin with, and 2) FiOS reportedly has seen its subscriber base increase 16 per cent in New York City since the standoff began. In any case, that speedy agreement with another provider under supposedly equal terms does cast TWC in a more tarnished light.