Aereo May Be Retrans Game Changer

The Aereo Internet service — and the court’s rejection so far of broadcasters’ request to stop it from streaming their content for free — could ultimately be a major impediment to already complex retransmission consent negotiations.

“Aereo is totally disrupting the marketplace,” says BIA/Kelsey Group VP Mark Fratrik. Resolving the Aereo issue, which broadcasters’ plan to continue pursuing in court, is one of the biggest issues facing them in the year ahead, says Fratrik, speaking Wednesday at the NAB Show in Las Vegas.

A non-paying streaming service like Aereo could “break the foundation” of the retransmission consent process between broadcasters and paid TV providers including cable and satellite companies, Fratrik says: “There is a possibility of dramatically affecting the rev stream that is important to local television stations as well as the networks.”

Joe Di Scipio, Fox Television Stations VP of FCC compliance, says: “The litigation is far from over,” adding that he is encouraged by a dissenting judge “who curiously described Aereo as a complete sham.”

A federal appeals court rejection last week of broadcasters’ request to stop Aereo from streaming their content without paying for it has created an uproar among broadcasters, accentuated by News Corp. COO Chase Carey saying on Monday that he would turn the Fox broadcast network into a cable channel if Aereo wasn’t stopped.

Fratrik and Di Scipio were was among four industry insiders who delved into the complexities of the retransmission consent system — and what does and doesn’t work for the parties involved.

With participants representing broadcasters, satellite service providers and the FCC, the panel touched on a variety of issues focusing on whether federal regulations overseeing retransmission consent, now 20 years old, affect the marketplace.

Di Scipio says the notion that the retransmission consent process “is tipped in the favor for broadcasters is just not true.”

But Stacy Fuller, DirecTV’s VP of regulatory affairs, says the regulations in place do, in fact, prevent the business between content providers and distributors from being “a true marketplace.  There are government rules that tip the hand in the relationship,” she says. The must-carry rules that require cable and satellite providers to carry certain TV stations regardless of whether they are watched is one such example, she said. So is the rule that prohibits providers like DirectTV from dropping TV stations during ratings sweeps, although broadcasters can pull their signal during the same period of time.

Fuller says the 20-year-old regulations — created at a time when satellite providers didn’t even exist — do not apply to today’s media marketplace.  She says the rise in the number of content blackouts due to negotiation failures — 91 in 2012, up from 51 the year before — proves that.

“You can either put in place rules that protect the consumers from blackouts and high prices or you can get rid of the rules altogether,” she says. “If we want it to be a true marketplace, then let it be a true marketplace.”