[opendtv] Re: White paper from CEA
- From: Craig Birkmaier <craig@xxxxxxxxx>
- To: opendtv@xxxxxxxxxxxxx
- Date: Mon, 31 Oct 2005 08:13:19 -0400
At 8:28 PM -0800 10/30/05, Tony Neece wrote:
>....their competitors to collect money from subscribers for them.
>
>I don't understand what you mean by this. How are broadcasters getting
>money from their competitors subscribers?
>
>Please explain this I really am interested.
Retransmission consent allows broadcasters to negotiate with cable
companies and DBS for carriage, as opposed to simply invoking must
carry to get on a system. When a broadcaster, or the network to which
they are affiliated chooses negotiation, they expect something more
than simply being carried without additional compensation.
Retrans consent was part of the 1992 Cable Act, thus most major
networks and their affiliates negotiate agreements in the early '90s.
CBS and their affiliates went for cash, causing cable companies to
pay them compensation for the CBS network - the cable systems simply
add this to your bill.
ABC, FOX and NBC negotiated for in-kind compensation. This would
include subscription fees for the non-broadcast cable channels owned
by the conglomerate that was negotiating, preferred placement of
non-broadcast channels in the extend basic tiers of cable systems,
and carriage of additional networks that the cable system would not
otherwise have carried. Because of this, NBC gained carriage for
MSNBC and CNBC; ABC used this tactic to take the Disney Channel from
the premium tier into the extended basic tier, charging subscriber
fees for these channel, and to build up the ESPN franchise and
related subscriber fees. later, after acquisition of ABC Family, they
used retans to gain favorable placement and subscriber fees for this
network. Fox used retans consent to gain carriage for FX, but was
unable to get Fox News Cahnnel carried, so they paid cable MSOs about
$700 million to get FNC onto cable systems. They have indicated that
in the next round of re-trans agreements they will get this money
back in the form of subscriber fees.
All of this is possible because these conglomerates can tie the
carriage of the popular content on their broadcast network to the
carriage of and compensation for other networks that are NOT
broadcast. When it is time to renegotiate a carriage agreement, the
conglomerate may ask the local affiliate to refuse to allow carriage
of the broadcast network unless the cable system agrees to the fee
structure for all of the non-broadcast networks owned by the
conglomerate. This usually happens during football season, when the
most adamant fans will inundate the cable company with complaints if
the broadcast network programming is with held to influence the
negotiations. This is how Disney has managed to run the price per
subscriber for ESPN 1 and 2 to the range of $2.70 to $3 per month per
subscriber to the extended basic tier. Fees for less popular networks
are smaller, but they still ad up to about $15-20 of a monthly cable
bill.
Virtually all of the conglomerates have announced that they will be
asking for cash for the main broadcast network when existing retrans
agreement expire. Why? simple, they already control the content on
cable systems, owning the networks that account for more than 90% of
all cable TV viewing. Now the conglomerates can turn the screws a
little tighter, and get the cable and DBS systems to collect cash for
them each month.
ALL OF THIS ADDITIONAL COMPENSATION CAN BE LINKED DIRECTLY TO THE
NEGOTIATING ADVANTAGE THAT THE CONGLOMERATE ENJOY BECASUE OF THE
PROTECTIONS ASSOCIATED WITH THE CARRIAGE OF THE NTSC SIGNALS OF THE
BROADCAST NETWORKS.
Regards
Craig
P.S. MANY stations have gained carriage of their DTV broadcasts, at
least the primary network programming. ALL of these stations are
being carried by voluntary negotiations. In some cases there is
compensation involved. It is important to note that cable and DBS do
not have major problems acting as the billing office for the
conglomerates. They will simply pass these costs through and add a
few percent to increase their profit margins.
And this is why we will never see the equivalent of Freeview in the
U.S. There is simply too much money on the table to go back to the
original deal...free content in return for ads.
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