Retransmission Battles Heat Up Before Super Bowl

Published March 1, 2012

While providing ample entertainment on the gridiron, perhaps the greater drama of February’s Super Bowl was the disputes between the network television stations carrying the game and the cable and satellite companies responsible for bringing it to viewers.

Television retransmission disputes, which at one time occurred only every few years or so, are now popping up every few months, most notably before “must see” ratings bonanzas such as the Super Bowl or the Academy Awards. In such instances, televised blackouts are threatened when a financial agreement cannot be reached between the television networks and the companies who retransmit the broadcast signal.

The most recent such dispute was between Sunbeam Television and DirecTV, after Sunbeam pulled the feeds from its stations in Boston and Miami from DirecTV after its retransmission-consent contract expired. Sunbeam restored the feed of Miami Fox affiliate WSVN-TV in time for DirecTV viewers to watch the NFC Championship football game on Fox, but it was much slower in doing so for Boston NBC affiliate WHDH-TV on Super Bowl Sunday.

‘Games of Chicken’
The Federal Communications Commission is considering regulations that would prevent disputes between broadcasters and pay TV distributors from blocking access to major sporting events. Whether this works depends on what is contained in the final rules. But all parties involved agree the current rules don’t work very well.

“In an annual rite of winter, another politician has sounded the alarm that a major event may not be televised,” said Robert Miller, a partner with Gardere Wynne Sewell LLP, a law firm dealing with telecommunications issues in Dallas, Texas. “With the Super Bowl featuring the hometown New England Patriots a few days away, Massachusetts Sen. John Kerry (D-MA.) warned Sunbeam Television and DirecTV that they better reach a deal permitting broadcast of this game or face the wrath of Congress and the FCC,” he said.

“Every year, under federal law, satellite companies like DirecTV, as well as cable operators, must get permission from broadcasters, like Sunbeam, to carry their programs,” Miller continued. “This permission, known as retransmission consent, opens the door each year for broadcasters to increase the fees that DirecTV and other companies pay for this right. And, every year, various games of chicken are played over these fees while viewers sweat out the possibility that negotiations will fall apart and they will miss their favorite shows or, in this case, the favorite show of all—the Super Bowl.”

Miller added, “Under the pretext of looking out for their constituents, these battles over getting retransmission consent present politicians like Sen. Kerry with an easy opportunity to push the parties towards resolution and curry favor with the voters. Such threats to get Congress and the FCC involved, however, are empty,” he said. “The marketplace, not governmental oversight, will rule this fight, as it always does.”

Good-Faith Negotiations
Craig Delshack, a New York-based attorney specializing in media and entertainment, points out many of the current rules were written at a time when broadcasters could profit enough from advertising alone. But with advertising dollars continuing to shrink, they’ve been looking to derive additional subscriber fees from cable and satellite companies, leading to the disputes at contract time.

Delshack recommends one way to resolve this issue in such a way that viewers—who have already made good-faith purchases of cable or satellite contracts—would not be held hostage prior to popular events is to have contracts that include per-subscriber fees that would continue for a set period during “good faith” negotiations even after the contract expired. Such fees would have to be structured in such a way that all sides would indeed negotiate in good faith.

Threat of Intermittent Blackouts
Delshack said the FCC carriage agreement revised by Congress in the 1990s is antiquated and requires updating so brinksmanship between content providers and cable companies doesn’t result in inflated fees to consumers or blackouts of their favorite programs.

For example, to open the New Year, Time Warner Cable found itself in a retransmission rights battle with the MSG Network, which pulled its programming from the cable operator’s lineup.

TWC subscribers woke up on New Year’s Day missing the MSG channels. TWC stated MSG demanded a 53-percent increase in payments, a claim MSG denied.

The threat of intermittent blackouts often includes advertising designed to alarm subscribers they’re about to lose programming.

Changing Dynamics of Pricing
Delshack noted it’s the cable operators, not the content providers, that send the bills to the customers, so the cable operators are automatically positioned as “the bad guys” when rates go up.

“If the cable operators were to tie increases in fees directly to increases by just one content provider or were to list the increases by each content provider, there would be a public cry for a la carte programming—paying for each channel a viewer desires—which would change the dynamics of pricing for content providers and cable operators alike and might not be sustainable,” Delshack said.

There could be changes in the pricing model going forward, just as there has been in the music industry, Delshack says. As more content moves to the Internet and subscription-based services like iTunes, this is already happening, he notes.

Phil Britt ([email protected]) writes from South Holland, Illinois.