Hoping to head off efforts to gut broadcasters’ retrans rights, the NAB is circulating a new study on Capitol Hill that concludes that broadcasters do not have undue leverage in retrans negotiations and retrans payments do not drive up cable bills.
Anticipating that the cable and satellite TV industries may try to weaken broadcasters’ retransmission consent rights through legislation this year, the NAB has begun circulating on Capitol Hill a 41-page study that rebuts the claims that broadcasters have too much leverage in retrans negotiations and that retrans payments will harm consumers by driving up subscription fees.
“Overall, retransmission consent represents an economically efficient regime that results in reasonable compensation for the value of broadcaster programming, and adoption of proposals to repeal or weaken the system would harm consumer welfare,” says the study by Jeffrey A. Eisenach entitled “The Economics of Retransmission Consent.”
Eisenach is chairman and managing partner of Empiris LLC, a Washington-based economic consulting firm.
NAB President David Rehr told TVNewsCheck that the study is a “proactive” effort to counter any attempts to undercut retrans. “We know the American Cable Association continues to talk about it.”
“When you read the study you walk away with the undeniable fact that it’s working just as Congress intended it to,” Rehr says. “There would be no rationale reason why anybody would want to alter the arrangement.
Among the study’s findings:
- The cable and satellite industry are more concentrated than the broadcasting industry. In 2006, the four largest operators accounted for 63 percent of all subscribers. “Thus, broadcasters do not have monopoly power and are not in a position to extract excessive fees from cable operators and other program distributors.”
- In retrans disputes, broadcasters are more vulnerable to economic losses than cable operators due to loss of viewers and advertising revenue.
- Retrans payments account for only a “trivial” portion of cable revenue and costs. “Retransmission consent fees account for only two-tenths of one percent of cable revenue today and industry analysts predict they will never rise above one percent.”
- Concerns about the loss of broadcast service due to retrans disputes are overblown, it says. A household is 10 times as likely to lose cable service and 24 times as likely to lose electrical service as it is broadcast service because of derailed retrans negotiations.
The study concludes that the retransmission consent regime that Congress put in place in 1992 is now achieving just what the lawmakers wanted it to. It is ensuring that broadcasters receive just compensation for their signals, it says.
“Such compensation ultimately benefits consumers by enriching the quantity, diversity and quality of available programming, including local programming,” it says. “Thus, proposals to repeal or weaken the existing system are misguided.”