Americans love their TV. They may not admit it, but according to the 2014 Nielsen Cross Platform Report, the average American adult watches more than five hours of live television every day. So even with all the hype surrounding DVRs, and watching shows online — people still sit in front of a TV set.
I know first hand how people love their TV and how unhappy they get when they lose access to it.
At the time of this post, DirectTV is not able to re-transmit several stations including WTHR-TV in Indianapolis, WBNS-TV in Columbus, which are owned by Dispatch Broadcasting, and more than 50 stations across the country owned by Raycom Media. It’s all over because of a retransmission fee dispute.
What is Retransmission Consent?
In 1992, the United States Cable Television Consumer Protection and Competition Act required cable operators and multichannel video programming distributors (MVPDs) to obtain permission from broadcasters before they can carry their programming.
Broadcasters could give cable companies one of two options: Pay for the right to carry their station and programming or require them to carry the channel — also known as “must-carry”.
There are benefits for stations to choose one option or another and depend on the size of the station and the quality of their programming. A small independent station may elect for must-carry coverage otherwise the cable company may determine their channel is not valuable enough to be included on their system.
Pay Cable Channels
I’m not talking about HBO or Showtime. Those are subscription channels. However, almost every network that is part of your cable lineup charges the cable company for your ability to view that channel.
For example, according the website What You Pay for Sports, ESPN charges cable companies $5.75/per subscriber to get ESPN. (That’s just ESPN, add on another dollar to receive all the other ESPN network fees. Those channel fees are less, but they don’t air NFL games.)
In the Midwest, you pay $1 for access to the Big Ten Network, while subscribers in Arizona pay much less.
For non-sports channels, you pay anywhere from just a few pennies up to over a $1 for channels like Disney and TNT according to The Wrap.
In my house we mostly likely will never watch Lifetime or Bravo, but we still pay for it every month. If you not a fan of sports, they you should really not be a happy about your cable bill.
Cable networks still have commercials in addition to their carriage fees, in essence two sources of revenue. That dual stream of income allows them to develop and pay for programming — even if nobody watches them.
Broadcast Stations left out
These cable networks cashed in by delivering new original programming that attracted new viewers, and took away a percentage of the audience from traditional networks. It also cut into what traditional broadcast networks could charge advertisers for commercials. This made it harder to invest in programming.
As local advertising revenue started to drop, broadcast stations adapted the cable networks model of pay for carriage via retransmission consent. Cable systems and other MVPDs have balked at paying the higher fees for over-the-air free television. Early on these fees were minimal, but have significantly increased over the years.
Multimedia reported in 2008 that local broadcasters were asking anywhere between $0.40 and $1.10 per subscriber per month in retransmission fees. Broadcasting and Cable also reported in 2008 that fees ranged between $1.00 and $1.65.
So how do they determine these rates? It all goes back to what you watch. Even with all the segmentation in our 200+ channel universe broadcast networks: ABC, CBS, FOX and NBC still attract the biggest share of the audience. CBS airs more NFL games than ESPN, but you pay less for it.
According to Nielsen, the Top 10 List for most viewed programs in the country almost all were on broadcast TV, during the week of August 18, 2014. Only two programs: 2014 Video Music Awards on MTV and a NFL Pre-Season football game made the list.
The infamous blackouts
In many cases, local broadcast companies and satellite companies negotiate new re-transmission deals and never make headlines. However when a deal over retransmission fees is not reached by the end of the contract, the cable or satellite company has no legal authority to re-transmit the local station’s signal.
Both the TV stations and the satellite providers turn on their propaganda machines on why the other party is at fault.
In the current example, DirectTV claims that Dispatch is seeking a 400% increase in programming fees! Without knowing the details, one could assume they’re asking for an increase from .25 to $1 per subscriber. Even if they were currently paying .50 cents a sub, that means they’re asking for $2. The message the broadcasters tell their viewers is they’re asking for a lot less then the other channels your cable company offers.
Networks want their money
The networks pay millions to develop programming and billions to license rights to carry sports like the NFL and NCAA. They now are demanding that local stations pay networks for the right to carry their affiliation. CBS is switching their affiliation from WISH-TV here in Indy to WTTV-TV in 2015 because the owners of WTTV were willing to pay CBS for that programming. Now all broadcast companies are on notice that the networks want a piece of those retransmission fees collected.
What is it worth to you?
In the end, as a consumer it’s up to you to lay blame. In many cases, you are already paying a “Broadcast TV Fee” surcharge in your monthly bill to support these retransmission fees. It’s a hidden cost, but it’s there.
Is network programming, local news and public service information important to you? Are you willing to pay a little extra each month for a cable or satellite company to deliver that programming to you with 200+ other channels? Then tell your cable or satellite provider to suck it up and reach a deal.
If you believe free over-the-air TV should be free and cable companies shouldn’t have to pay for it, then expect the quality of those stations to decline as they continue to lose audience share and the advertiser revenue with it. You can also expect big events like the Super Bowl, NCAA Tourney, The Olympics and other programming to be all on cable. They’ll be the only ones who can afford those license fees.
In the end, this is all boils down to who is going to get the biggest chunk of your monthly cable bill. It just sucks you’re in caught in the middle and there is little you can do.