State Broadcasters Oppose ‘Local Choice’

The 50 state groups tell Sens. Jay Rockefeller and John Thune that their retrans reform proposal creating a broadcast-only a la carte system of payment by cable subs “will diminish broadcast localism and harm consumers without actually providing consumers meaningful choice or meaningful cost savings [and] will likely become the slippery ‘a la carte’ slope that broadly upsets a vibrant and functioning video marketplace.”

The National Alliance of State Broadcasters Associations has spelled out its objections to the “Local Choice” retrans reform proposal by Sens. Jay Rockefeller (D-W.Va.) and John Thune (R-S.D.) in a letter to the two today.

The group, comprising 50 state associations say the proposed addition to the  Senate Commerce Committee’s reauthorization of the Satellite Television Extension and Localism Act (STELA) “will unjustifiably eliminate television broadcasting’s longstanding statutory right of retransmission consent and unfairly single out the free, over-the-air, local television broadcast industry for mandatory “a la carte” treatment.”

The letter continues: “All broadcasters appreciate your recognition of (i) the unique and critical value of broadcast localism, (ii) the economic necessity that broadcasters be fairly compensated for their investment in programming particularly when retransmitted by pay-television providers to their paying subscribers, and (iii) the importance of meaningful consumer choice. However, the proposal will destroy localism, including the backbone of our nation’s Emergency Alert System, by denying fair compensation to broadcasters without providing consumers, who continue to complain loudly about the monthly cost of pay-television service, with any meaningful choice or relief. Furthermore, as reflected in over a decade’s worth of economic literature and policy debate, mandated a la carte pricing proposals have been proven to increase prices, decrease programming diversity, and result in fewer — not more — choices for consumers. Indeed, these are precisely the exact opposite results that your proposal appears to seek.

“The prescription of a broadcast-only a la carte regime exacerbates these economic effects because broadcasters are much more reliant upon advertising as a percentage of revenue (almost 80%) than other programming channels (HBO: 0%; TWC SportsNet LA: 16%), and because consumers wishing to decrease the cost of their bills will only be able to do so (by no means a ‘given’) by opting out of their local broadcast channels, even if they prefer broadcast channels over non-broadcaster programming for which the proposal denies them full per-channel “choice.” Make no mistake, the net effects of a broadcast-only a la carte requirement will diminish broadcast localism and harm consumers without actually providing consumers meaningful choice or meaningful cost savings.

“Such an outcome,” the letter continues, “is inconsistent with the long-held values of the universal accessibility of broadcasting’s local news, weather, and emergency information, as well as broadcasting diversity. As local broadcasters struggle under a la carte economics, there will be less resources to invest in newsrooms, journalists, and local programming and perhaps even fewer broadcaster outlets to cover local affairs and emergencies in the future. Additionally, broadcasters that serve diverse audiences with religious, ethnic, and foreign language programming will find it harder to sustain such niche programming investments with the decline in access to subscriber viewership.

“An a la carte model will also chill the willingness of broadcasters to cover controversial issues of public importance due to this fact alone — today viewers who are unhappy with a particular program, subject or viewpoint that was aired can, as a form of protest, change the channel and not return to a station’s programming for some period of time. Under a broadcast a la carte model, those same viewers, will be able to extend their “protests” by withholding payment of at least that station’s portion of their monthly subscriptions, thereby chilling the journalistic and editorial decisions of every station, and throwing the economics of the nation’s local television broadcast system, into chaos. All of this will harm not only consumers receiving broadcast programming through pay-television providers, but also those consumers who receive broadcasting for free via over-the-air reception.”

BRAND CONNECTIONS

The broadcast groups also raises a number of questions about how such a system would be implemented, asking:

  • “Absent a statutory requirement or contractual relationship between broadcasters and pay-television distributors, what incentive would these distributors — who are competitors to broadcasting — have to cooperate with the television broadcast industry in making a la carte work as this proposal intends? Who and how would that cooperation be policed?
  • “Given that the proposal apparently intends to save those consumers, who opt out of paying for the broadcast stations, money on their monthly subscriptions, who and how will pay-television providers be held accountable?
  • “How would pay-television providers acquire ancillary programming rights, such as video-on-demand and over-the-top rights that are currently contemplated as part of the retransmission consent negotiations?
  • “An a la carte business model would upend the network-affiliate relationship with potentially devastating consequences for the networks, for their affiliates and for the financial markets. Would existing retransmission consent contracts, many of which are long-term in nature, remain valid until expiration or would they be voided? All of the television network agreements provide that their affiliated stations pay their networks “reverse compensation” that is tied to retransmission consent fees paid by pay-TV providers. How would those agreements — which are multiyear and expire at different times — be treated under the proposal?”

In conclusion, the groups say, “Once the proposal becomes a matter of public knowledge outside the Beltway, there will be enormous pressure on Congress to expand the a la carte model beyond broadcast, and well it should, in response to the millions of constituents who will complain that the proposal does not provide them with the right to pick and choose which non-broadcast programming (which represent the vast majority of their monthly pay-TV bills) they wish to pay for. In short, the proposal will likely become the slippery “a la carte” slope that broadly upsets a vibrant and functioning video marketplace.”


Comments (19)

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Don Thompson says:

August 28, 2014 at 9:21 am

Dear Congress ……….. As your local TV stations, we believe we will make too much money under the Rockefeller-Thune Local Choice proposal, and, therefore, must oppose it. We just don’t feel it’s right that you will finally let us see whether, based on our superior ratings, consumers will pay us more than they pay ESPN. We look forward to working with you on legislative alternatives that will make our shareholders less wealthy. Sincerely, Your local broadcaster. …………………….. Please follow me on Twitter @TedatACA

    John Bagwell says:

    August 28, 2014 at 10:07 am

    Dear Congress……..Although my pal Matt and I from the ACA say that we are “FOR a model that gives consumers choice through a la carte, tiering, online viewing, etc.”, we won’t come out say directly and straight-forward that we want a true a la carte for both broadcast AND cable because we know that the many cable systems we represent will not survive if we do so. So we want you to pass a bill that singles out broadcasters because that will not harm us or the cable systems that we represent. Oh and please don’t pay attention to all of the blackouts that occur involving cable networks and regional sports networks, especially the Weather Channel/DirectTV dispute that occurred earlier this year because the Weather Channel is a member of the ACA. Sincerely, Ted and Matt from the ACA.

Julien Devereux says:

August 28, 2014 at 10:07 am

So long as I can continue to get my TV over the air, I don’t care what the evil cable companies do.

Tim Darnell says:

August 28, 2014 at 10:25 am

The proposed bill is bad for broadcasters and bad for cable companies. Ted, the ACA is short-sighted if it thinks this will not be a slippery slope for Congress, and local governments.

Regina Cantu says:

August 28, 2014 at 10:36 am

Local broadcasters should look at Local Choice as an opportunity to get on the right side of a consumer issue and build in some protections against that outrageous behavior of the networks when it comes to reverse retrans. Instead of torching your relationship with the Senator that might be the next Chairman of the Commerce Committee, maybe you should look at Local Choice as an opportunity to get the networks hands out of your retrans cookie jar. I would go into Thune and say you would support Local Choice as long as you include a provision that requires all retrans money collect stay with the station owner, and prohibit any retrans money from going to the the network. If the networks are going to take 50 to 90 cents of every retrans dollar you collect, what good is retrans in the long run for local stations anyway. You have a chance to fix the system by working with Thune and come out looking like you care about consumers. Instead, you send letters that oppose Thune and take anti-consumer positions. Not a great long term strategy in my humble opinion.

    John Bagwell says:

    August 28, 2014 at 11:10 am

    So you don’t think a network is worthy of any retrans money even though they spend millions of dollars on sports and other network programming?

    Regina Cantu says:

    August 28, 2014 at 6:46 pm

    I think retrans money was intended to go the station owners who were supposed to use that money to support local stations. It was never intended to be a money grab for the networks, but that is exactly what it has become. Les Moonves is basically taking the local stations’ retrans money and paying himself and his key executives huge bonuses with it while local newsrooms are consolidated and staffs are cut.

    If the networks need reverse comp money to pay for network programming, how did they pay for network programming before 2009 (when reverse retrans really started to flow)? If the reverse retrans money is going to pay for sports programming, why, since 2009, do they keep letting sports leagues and college conferences move their games to cable networks like ESPN, SEC Network and Big Ten Network? Does ABC have NFL anymore? Why is TBS and TNT getting the NBA and NCAA basketball? Why aren’t all the major college bowls still on broadcast?

    John Bagwell says:

    August 29, 2014 at 8:53 am

    Apparently you don’t follow our industry that much but the cost to produce programming has risen since 2009 and have you not seen how much the networks are paying for sports nowadays? Yep, it’s gone one up since
    2009. And the reason why a lot of sports are moving to cable? You really don’t know this one? When is espn is collecting $5.50+ per sub and TNT is making $1.50+ per sub, they can afford the crazy high sports fees. You think espn is making a direct profit from ad sales in MNF? I highly doubt it, being that they pay $1 billion + for it.

    Regina Cantu says:

    August 29, 2014 at 9:50 am

    Has the cost of programming risen at the same rate as retrans revenue since 2009? I don’t know the answer, but I highly doubt it. I do know that Les Moonves made $32M in 2008, $43.2M in 2009, $57.7M in 2010, $66.9M in 2011, $62.2 in 2012 and $66.9M in 2013. It appears to me that Les and his cronies are keeping a big chunk of the new found reverse retrans money for themselves.

    John Bagwell says:

    August 29, 2014 at 3:52 pm

    So now you pull the whole “CEO’s” are overpaid card.

    Regina Cantu says:

    August 29, 2014 at 4:18 pm

    If you can’t connect the dots between reverse retrans and Moonves’ salary more than doubling between 2008 and 2011, then you might want to pick a different nickname. Reverse retrans is less about paying for new programming as you say and more about enriching network executives and shareholders through big salaries and stock buybacks. Do the research, you will be surprised what you find.

Don Thompson says:

August 28, 2014 at 10:40 am

I would point out that local TV signals are the purest form of a la carte there is …. Why should government regulation enable TV stations to charge consumers who don’t want the signals? Why should government regulation allow TV stations to black out pay-TV customers who do want the signals until those who don’t have been forced to pay for them through their local cable operator?
Local TV stations have always complained about the cable “gatekeeper.” It’s one of the reasons why Sinclair filed an FCC petition to the deny the Comcast-Time Warner Cable merger. Under the Rockefeller-Thune Local Choice proposal, there are no gatekeepers. Sinclair could charge as much as it wants (even more than ESPN) and many of its problems with Comcast-Time Warner Cable would vanish ………………………… In the end, I bet Sinclair proposes Rockefeller-Thune Local Choice as a Comcast-Time Warner Cable merger condition, while simultaneously fighting it on Capitol Hill ……………………. Please say hello to the talented Paul Shaffer while I move over to my desk and say ………………….. Please follow me on Twitter @TedatACA

    John Bagwell says:

    August 28, 2014 at 10:58 am

    “Why should government regulation enable TV stations to charge consumers who don’t want the signals?”

    Why should cable systems charge consumers for 80 cable channels when all they want is 7?

    Darrell Bengson says:

    August 29, 2014 at 11:16 am

    The day cable providers go to a true A La Card system where customers buy only the stations they want is the day broadcasters will agree to do the same…as it is, cable and satellite TV is the biggest ripoff for customers out there. Of course, I do understand that the likes of 3rd and 4th grade programming like shopping shows and religious nutters strongly oppose A La Card programming because they know nobody in their right mind would pay for that and thus cable would lose a huge chunk of income.

none none says:

August 28, 2014 at 11:27 am

Rolla – You can’t keep the networks from trying to extract payment from local stations. The networks won’t (and don’t) call it ‘re-transmission money’ they just call it a Programming Fee…and so it goes.

    Regina Cantu says:

    August 28, 2014 at 6:52 pm

    Legislation could limit what the networks could do if the local station owners were willing to seize the opportunity.

Ellen Samrock says:

August 28, 2014 at 11:47 am

As I said a few days ago and as state broadcasters are saying now, Local Choice is a slippery slope. It’s not broadcast television on pay-TV that consumers hate, it’s being charged for cable channels they don’t watch. And if they see that the technology exists to a la carte local channels, pay-TV subscribers are going to demand the same for the cable nets…all the way to Capitol Hill if need be. The cable nets and groups like the ACA need to oppose Local Choice. You guys really don’t want to go there. And Rockefeller and Thune need to take a page from the Obama playbook and go golfing. They need to stop their meddling into things they know little about.

Wagner Pereira says:

August 28, 2014 at 12:24 pm

This is really a mute point once Congress is reminded that Broadcast TV stations who they need for re-election and who they extract the lowest rate for Political Advertising might possibly not around to give them the Reach and Frequency at the lowest cost in the future, thus they would need to raise incredible multiples of funds compared to what they raise now for re-election – and it is literally impossible to get the same reach and frequency even if they do raise those multiples.

Don Thompson says:

August 28, 2014 at 5:14 pm

CBS Radio Rejects Local Choice Ad
By John Eggerton/Multichannel News

A quartet of CBS radio stations has rejected an ad from the American Television Alliance promoting a new “local choice” retrans-remaking proposal that TV stations say threatens their business model and localism. ATVA, comprising cable and satellite operators and others, launched a six-figure ad campaign in 15-20 markets that included broadcast radio, print and online. “The ad did not meet our broadcast standards,” said a CBS Radio spokesperson, who declined further comment.
The four CBS-owned stations ATVA submitted the ad to rejected its, said ATVA. They are: KMOX in St. Louis, WCCO Minneapolis, KXNT Las Vegas, and KDKA Pittsburgh. The National Association of Broadcasters, of which CBS is a member, declined comment …………………………………….. Please follow me on Twitter @TedatACA


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