With the financial pressure on system operators, pitted against need for broadcasters to eventually achieve parity with the most-watched cable networks, retrans fights and blackouts are bound to sometimes happen. The sad reality is that in the short term everyone loses. Viewers lose their favorite programs, stations lose news viewers, DirecTV loses subscribers and station general managers lose their minds.
The sight of two 1,000-pound guerillas fighting it out would be great entertainment except for the thousands of disadvantaged viewers and the misery of local station executives who have to take their nonstop calls. For general managers, it is a wretched experience, like having a tooth filled without Novocain.
Money is of course at the root of all negotiations, though today’s retrans agreements encompass a myriad of other issues, from streaming rights to secondary channel carriage, all capable of bringing the parties to impasse.
Still, no matter what the dueling press releases say, the current Nexstar-DirecTV tussle is probably about the money. Nexstar is a proud aggressor when it comes to seeking fair pay for its product, so it is likely hoping to set a new benchmark. DirecTV, dogged by subscriber cancellations and profitability issues with its OTT service (two price increases within the past year) is equally motivated.
Almost 100 markets losing network affiliates at the same time is a very big deal. In fact, it is such a big deal we should step back and ask ourselves what bigger issues might be in play. Turns out they are very big indeed.
For over a decade the satellite and cable industries have had one overriding legislative goal. They want a moratorium on blackouts, requiring station signals to stay up during contract negotiations. Sounds sort of reasonable on the surface, until you realize such a rule would take away all negotiating power from stations. There is literally no other lever station owners can pull. Their only option is removing their signals. Otherwise, negotiations would never end.
With Chairman Ajit Pai at the helm, there is zero chance the FCC will intervene, so the only hope for operators is that Congress will someday change the law. Broadcasters have so far won the congressional argument that the current free market system works just fine. They make the case that retransmission fees are essential to stations fulfilling their news, public emergency and public service missions.
With national spot continuing to decline, advertising alone is no longer sufficient to fully fund news operations. Retransmission revenue has put a finger in the dike. Plus, the majority of retrans dollars eventually goes to the networks in the form of program payments. Those payments keep first-class programming such as the NFL and the Olympics on traditional television.
Even so, DirecTV has to hope the combined complaints from Nexstar viewers across the nation will help make their case for a moratorium on blackouts, especially if the outage goes on for some time. Congressional switchboards are already overheating from the increased level of calls, which is why we are beginning to hear squeals of distress from Capitol Hill.
So far, Nexstar seems to be winning the lobbying fight. Sen. Richard Blumenthal of Connecticut was the first to weigh in, urging compromise in a way that favors Nexstar. Since then other senators and representatives have added their voices, some echoing Blumenthal. The crescendo will build until one side gives ground.
With the financial pressure on system operators, pitted against need for broadcasters to eventually achieve parity with the most-watched cable networks, these outages are bound to sometimes happen. The sad reality is that in the short term everyone loses. Viewers lose their favorite programs, stations lose news viewers, DirecTV loses subscribers and station general managers lose their minds.
Battling press releases and claims of bad faith don’t help. The longer it goes, the more personal it will become. Let’s hope this one is settled soon.
This is one in a series of occasional columns from Hank Price, a media consultant, author and speaker. He spent 30 years managing TV stations for Hearst, CBS and Gannett, including WBBM Chicago and KARE Minneapolis. He also served as senior director of Northwestern University’s Media Management Center and is currently director of leadership development for the School of Journalism and New Media at Ole Miss. He is the author of Leading Local Television, a handbook for general managers.