The FCC’s Retrans Coin Is Up In The Air

Heads, the FCC listens to CBS’s Les Moonves and other broadcasters who are urging it to leave the retrans rules alone so they can continue to get fee increases. Tails, the agency agrees with Massillon Cable TV's Bob Gessner and other cable operators who contend retrans needs to be overhauled to decrease broadcasters’ leverage and curtail the fees. How the coin will land is anybody’s guess -- and the coin is worth billions.

In my interview with him this week, CBS CEO Les Moonves more or less dismisses the possibility that the FCC will rewrite its retransmission consent rules this fall to make it tougher for CBS and other broadcasters to continue winning significant increases in fees with every contract renewal. Cable is doing just fine, he said, even though it is now paying out billions to broadcasters.

Moonves could hardly have told me otherwise.

At an Investor Day conference in New York, he had just promised investors and analysts that by 2020 CBS would take in $2.5 billion a year from retrans and reverse comp, essentially a hefty share of affiliates’ retrans revenue. That’s $1.7 billion more than CBS got in 2015 and $500 million than it had previously been promising by 2020.  

“Every retrans deal is better than the one before and every reverse comp deal is too,” he said.

Retrans/reverse comp is the biggest of CBS’s ”four pillars” of growth over the next five years. If it crumbles, the whole edifice gets wobbly.

Currently, the FCC is taking a hands-off approach to retrans, requiring only that the parties negotiate in good faith, which doesn’t mean much right now.


At the prodding of cable and satellite interests, Congress last year ordered the FCC to look at its retrans rules and see if something needs fixing. The FCC dutifully complied last September, launching a rulemaking that should be ripe for action this summer or fall.

I can’t tell you where the FCC will end up on this issue, but I can tell you that the cable and satellite operators are working hard to win some relief. And they have a different view than Moonves of how things are going at the FCC.

Their efforts may be best personified by Bob Gessner, owner of a single small cable system serving some 50,000 subscribers in Massillon, Ohio.

He sees how much the escalating retrans fees he pays to carry the Cleveland TV stations are contributing to his overall programming costs, pushing up subscribers fees and causing some erosion of the subscriber roll.

As chairman of the American Cable Association of small operators, he has been active in making cable’s case for relief in the form of new rules that would diminish broadcasters’ leverage in retrans negotiations.

And, contrary to Moonves, he is confident that the FCC will act to provide that relief.

From his visits to the FCC, Gessner told me that FCC Chairman Tom Wheeler “is seriously planning to move forward with changes to existing good-faith rules that will provide some more teeth, and provide some more benefit to consumers

“That’s really what it comes down to,” Gessner said. “The FCC has the ability to add more points to the good-faith rules, to try to avoid more of the historic number of broadcast blackouts that we’ve seen over the past few years. And that’s his interest as well as ours, to see fewer blackouts, and consumers taken out of the middle of these negotiations.”

The retrans reformers use the blackouts that occur when negotiations hit a impasse as their basic public interest arguments. Broadcaster counter that blackouts are a canard because they are so few and far between.

Gessner wants the FCC to declare that broadcasters are acting in bad father if they:

  • Bundle retrans with rights to regional cable sports networks. This one seems aimed at Fox since it’s the only broadcaster with regional sports nets.
  • Refuse to substantiate bargaining claims. “If you’re going to make claims that you’re the top-rated station, or that everybody else is paying a rate, prove it,” Gessner said.
  • Blackout online programming that duplicates what’s on the station.  In its titanic retrans battle with Time Warner Cable in the summer of 2013, CBS blocked access to its programming to ratchet up the pressure on the cable operator. I don’t know how determinative that tactic was, but CBS eventually won the day.
  • Blackout, or even threaten to blackout, a signal just prior to a marquee programming event like the Super Bowl or Oscars.
  • Invoke “after-acquired” provisions. Such provisions enable large station groups with blanket retrans deals to demand the same — invariably higher — payments for every station they acquire. “You have to agree to pay rates, terms and conditions, about a station you know nothing about,” Gessner said.

In a petition to deny the merger of Nexstar and Media General, the ACA put another scheme for curtailing rising retrans fee on the table — baseball-style arbitration. If the parties can’t come to a number, they go to a arbitrator. Each side presents a number it is willing to accept and the arbitrator would pick.

It would take the FCC to mandate arbitration, Gessner said. Broadcasters would never willingly agree to it, even if the arbitrator is required to base his decision on ratings.

Gessner said that he has been through this in negotiating with the regional sports nets.

“In a year, when the team does really well, they’ll come to me and say, we got a winning team. We’re worth more. In a year when the team is doing poorly, they will come to me and say, we need to rebuild the team, so you should pay us more.

“It’s always, you should pay us more. Nobody’s ever willing to say, my content stinks in the last few years, so you should pay me less. They’ll never agree to that.”

I should note that another anti-retrans idea is still rattling around the FCC — the elimination of the syndex and network non-duplication rules, which would make it easier for cable and satellite operators to import a distant broadcast affiliate if they can’t make a deal with the local affiliate.

On his own motion, Wheeler tried to move on that last year, but was frustrated by Commissioner Mignon Clyburn, who uncharacteristically denied him his necessary third vote. It could re-emerge in the swapping of votes that goes on all the time at the FCC.

Like many political prognosticators you see on the cable networks, I suspect that Moonves and Gessner are not actually telling me what they believe will happen at the FCC so much as they are saying what they want to happen.

My point is nobody today know what will happen, maybe not even Wheeler himself. In any case, Moonves and Gessner can’t both be right.

Harry A. Jessell is editor of TVNewsCheck. He can be contacted at 973-701-1067 or [email protected]. You can read earlier columns here.

Comments (22)

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Manuel Morales says:

April 8, 2016 at 3:00 pm

Paging Matt Polka and Ted Hearn….

The idea that the ACA wants more regulation in one breath and less in another breath really is precious. The simple solution is to not carry the broadcasters if they want too much money.

    Sandy Hinkle says:

    April 8, 2016 at 5:21 pm

    Hey, Sammy, we didn’t tell the FCC to regulate, although we support the effort. A bi-partisan Congress told the FCC it was time to start a rulemaking to tighten up the good faith rules, because of the historic number of broadcaster retrains blackouts that were harming consumers. The issues for us, like many small broadcasters too, I would think, come down to issues of big vs. small. Consumers, in general, are being harmed by the excesses of retrans (IMHO…), but particularly where smaller entities (smaller cable guys or smaller broadcasters) have to negotiate with big guys (huge broadcast groups and networks, or huge MVPDs). I think if you ask your smaller broadcaster colleagues, they would say that they’d like a little regulation too! In any event, if tightening the good faith rules result in fewer blackouts, less contentious negotiations, and more balanced outcomes for all, then I would call that a success and a win-win-win for cable guys, broadcasters, and consumers. Good talking to ya! It’s been a while! MMP-ACA

    Wagner Pereira says:

    April 8, 2016 at 5:49 pm

    @SmlCblGuy – Just remember, if you do not think the Station justifies what they are asking for in Retransmission, simply do not carry it. The decision is totally in your hands! Funny how you are trying to shift the focus to Congress.

    Keith ONeal says:

    April 8, 2016 at 10:53 pm

    @Sammy ~ You haven’t heard of the must carry rule, eh? Cable/Satellite providers could, when a retransmission contract ends without a new agreement, change the station from retransmission to must carry, keep the station on the provider, and NOT having to pay a penny to them!!!

    Manuel Morales says:

    April 9, 2016 at 8:32 am

    Incorrect. Retrans or Must Carry is an election made by a station. When a station elects Retrans is runs the risk of not coming to an agreement with the MVPD and not being a part of its channel lineup. When abstation elects Must Carry is gets guaranteed carriage but it does not get financial compensation for its carriage from the MVPD.

    Veronica Serrano Padilla says:

    April 9, 2016 at 11:54 am

    A station could do this, but if I’m not mistaken, they’d have to wait it out for three years before doing so… My understanding is that a station has to decide whether they’ll go the Must Carry or Retransmission route every three years – they don’t get to change midstream.

    David Stroupe says:

    April 11, 2016 at 11:09 am

    @Insider – funny how most retrans agreements mention good faith negotiations. The dictionary defines good faith as an “honest intent to act without taking an unfair advantage over another person or to fulfill a promise to act, even when some legal technicality is not fulfilled.” Clearly a minnow can’t negotiate with a whale. Furthermore, a 550% increase in retrans fees over 5 years is called robbery…not good faith. If we raised our rates that much we would be out of business…not experiencing record profits.

    Wagner Pereira says:

    April 11, 2016 at 11:01 pm

    Well, when you started off with a product that you were paying a highly discounted rate for, 550% is not robbery. Just because you were paying .20 per sub and it is now $1.30 when it should have been $4+ 5 years ago, it is not an apple to apples comparison. Again, look at the usage compared to the other networks carried and price accordingly. Remember, it was Cable Companies that first opened Pandora’s Box and started paying to carry cable channels. No way to blame Broadcasters for wanting in on the action, when 35%+ of the viewing on MVPDs are Broadcaster’s Product.

    Veronica Serrano Padilla says:

    April 12, 2016 at 2:09 pm

    You are quite correct in your observations (and, yes, it might seem odd for a person involved on the cable side to say so.) But do consider a few points, 1) broadcasters seek parity in compensation with satellite-delivered cable channels. This sounds fair, yet while broadcasters want to be considered as equals to cable channels, they are unwilling to provide the same revenue opportunities that cable channels grant. By this I mean local advertising avails, which the MVPD can use to offset the cost of programming. While ESPN may be charging $4 – $5 per sub per month, MVPDs routinely make a significant income on local ad avails inserted on that channel, essentially reducing their per sub costs. Broadcasters simply won’t offer that revenue opportunity to MVPDs. 2) While not a major issue to larger cable companies in urban areas – many of who receive broadcast stations on fiber – broadcast stations can not always provide a consistent quality signal to rural MVPDs the way a satellite-delivered cable channel can. Yet broadcasters are not willing to take this into consideration when negotiating with rural MVPD systems.

    Wagner Pereira says:

    April 12, 2016 at 5:06 pm

    Considering how much those cable avails go for, the return is miniscule. MVPDs cannot make enough back from local inserts on ESPN (and others) to bring down the cost close to what they are paying OTA Stations in Retransmission.

    Veronica Serrano Padilla says:

    April 12, 2016 at 6:51 pm

    I don’t doubt it, but that wasn’t really the point of the discussion or, for that matter, the suggestion – merely that broadcasters often argue that they should be compensated and treated just like cable channels, yet are unwilling to provide the same as cable channels. It seems broadcasters often are the epitome of “have your cake and eat it too” mentality (as in beating their chests about how great free TV is, while at the same time charging MVPD viewers.)

    Keith ONeal says:

    April 12, 2016 at 10:17 pm

    @Insider ~ It was NOT the Cable/Satellite providers that opened Pandora’s Box ~ It was Congress through that Cable/Satellite Act of 1992 that did it.

    Wagner Pereira says:

    April 14, 2016 at 12:19 am

    Another day, another incorrect post from @Flashfool. Cable opened up Pandora’s box prior to 1992 with payments to cable channels. 1992 just allowed OTA TO GET THEIR FAIR SHARE.

miss Aisha al mana says:

April 13, 2016 at 11:49 am

Disagree? Fine. But don’t call someone a moron, idiot, etc. We can have intelligent discussions AND educate each other.