Industry Perspective

The Viacom-EchoStar dispute wasn’t just a standoff between content and distribution; it displayed the ability of a programmer to use a government regulation called "retransmission consent" to create leverage in the marketplace. While Henry Schleiff, Court TV’s Chairman and CEO, and I were being interviewed recently about this, we were asked: "Court TV is at 80.2 million subs. It’s a household brand name. It achieved a .9 HH rating in primetime in 2003. Why do you care about this issue?" We care because retransmission consent is simply bad regulatory policy-it precludes the distribution world from operating on a level playing field. Rather than competing for shelf space and license fees in an open marketplace, the broadcasters increasingly use this regulatory lever to secure higher license fee increases for incumbent networks. Those fees translate to more programming and marketing dollars, compounding the competitive advantage held by broadcaster-affiliated cable networks. Independents like Oxygen, Court TV and GSN (formerly Game Show) cannot use this regulatory hammer in negotiations. In the absence of a retransmission consent law, it would be reasonable to ask why such a tying arrangement doesn’t violate antitrust laws. But with retransmission consent, the government has officially blessed the use of such unfair leverage. Ask any MSO: "Hey Bob, what can I do about it? I have to carry the Super Bowl and the Olympics." Retransmission consent is THE trump card in distribution deals. What distributor is not going to get its retransmission consent deals done if its deal expires the day before the Super Bowl? The EchoStar-Viacom settlement is a relief for lawmakers, who were receiving thousands of calls from their constituents, concerned about missing the NCAA tournament. However, independents like The Tennis Channel, World Asia, and College Sports Network will have to continue to earn subs the old-fashioned way, because lawmakers will not be able to help them out. Nicktoons may have gotten their slot. Multicasting -The Next Big Issue If consumers didn’t like the EchoStar-Viacom standoff, wait until they see what happens if the FCC approves digital multicasting. Multicasting could mean that the four major broadcasters ultimately will have significant control over a cable system’s bandwidth, and in effect, decide what new programming will be added to a cable system’s channel line- up. Will it be their own repurposed content, or will it be content created specifically to compete with cable nets not affiliated with a broadcaster? How then, will independent voices be heard? The FCC again is considering how deeply it should get involved in what should be a competitive market place. It is now asking whether the must carry requirements should be interpreted to force cable operators (and DBS) to carry multicast broadcast channels in each local market. The Cable Act requires operators to carry "the primary video…of each of the local commercial television stations carried on the cable system…" But, broadcasters argue that "primary video" means all of the programming feeds a broadcaster can cram into its digital allotment, and not just its main channel. The issue has become more complicated since major broadcasters have announced plans to create localized news "multicast channels" in an effort to influence the FCC’s decision. In reality, this appears to be the next regulatory "land grab" in the same way networks leverage their market power using the retransmission consent rules. It won’t be long before each broadcaster controls 18 multicasted channels in each market, with each channel having a guaranteed place on the dial. Rather than gaining shelf space on merit and consumer appeal, these channels could be artificially forced on cable systems through retrans and multicasting. Retransmission consent regulation has materially shifted power to broadcasters. Court TV will continue its Washington efforts to level the playing field for all programmers.