Saturday, January 17, 2009

Another way to raise your cable rates (and your blood pressure)

The issue of retransmission consent is not sexy, and as such, it is often relegated to the back of business and technology sections of newspapers (when it's covered at all). Only occasionally, when a cable MSO and a broadcaster fail to reach some sort of compensation agreement (with the cable company agreeing to pay the broadcaster a certain amount for the right to "retransmit" their signal), do people become aware of or hear use of the term. Such was the case, for instance, when a number of Lin Broadcasting stations could not reach an agreement with Time Warner last October. Thus residents in such cities as Austin, Buffalo and Dayton suddenly found their NBC affiliate "going dark." After a few weeks, they finally reached a deal.

As the traditional business model for broadcasting continues to break down, broadcasters have started to view compensation for carriage on cable as a potentially untapped (or at least, not sufficiently tapped) area for additional income. Thus these battles between cable operators and broadcasters were expected to become increasingly high-profile events in 2009. However, a recent article in Multichannel News suggests that in fact, these two stakeholders are working behind the scenes to resolve their issues.

On the surface, this might seem like a good thing -- those of us who receive a clear broadcast signal through our cable service can rest assured that we will continue to get this signal in an uninterrupted fashion. But in fact, because these debates aren't being aired publicly after all, the implications of these arrangements aren't being publicly discussed either. As the aforementioned article notes, part of the reason that cable companies and broadcasters are eager to make these deals happen quickly and quietly is because:

"...Both sides, in an effort to avoid confusion for consumers surrounding the upcoming digital transition of broadcast signals, had proposed a “quiet period” for retrans negotiations prior to the Feb. 17 [digital] transition deadline. While no formal agreement was reached, it appears that broadcasters and cable operators decided to keep the vitriol in these negotiations to a minimum for the time being. Both sides are also wary of attracting too much attention from a new presidential administration that has sent some signals of its desire to further scrutinize the media industry."

While it's all well and good that broadcasters are being compensated for their signal, the way that these deals are being financed is quite problematic. In short, the cost is likely to be passed on to consumers in the form of even higher cable bills. Not only will we have higher cable bills, but we are going to be indirectly paying broadcasters in yet another way (at the very same moment that the government gives these broadcasters digital spectrum on which they can multicast, no less).

Even more troubling is that these deals are being struck in a fashion that bears a striking resemblance to the block booking practices of the studio era: the very article I cite above, for example, states that CBS has agreed in some cases to take less money for its stations in exchange for higher license fees for Showtime, which it also owns. This means even though Showtime is likely to provide viewers with fewer films than before (due to the end of output deals with three major studios), it will be paid more money by cable companies. (Given these circumstances, is it any surprise that the new mantra of Showtime executives is "original programming is the thing?")

Sure, I enjoy Weeds, Dexter, and other new original programs aired by Showtime. What I don't enjoy are these back-door dealings. Even more frustrating is the extent to which the attention being directed toward an already mismanaged D-TV transition is helping to distract us from some more questionable business practices taking place in the media industries.

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