Handling Retransmission Fees; A Curse And A Blessing For Broadcasters

Dealing with retransmission fees

According to a 2015 Pew State of the Media report, retransmission fee revenue for local stations has been steadily growing since 2006, leaping up from $2.4 billion in 2012 to $4.9 billion in 2014. That amount is projected to double by 2020.

Retransmission Fees: A Curse and Blessing of the Digital Age

Retransmission fees have been around since legislation passed in 1992, requiring cable providers to obtain permission from broadcasters before carrying their programming. The recent hike in fees, however, is related to changes in technology.

While streaming is popular, you can’t really avoid all the commercials the way you can by fast-forwarding through a show on your DVR. Most importantly, many local TV stations still don’t offer complete broadcasts for streaming on their websites; those that do usually don’t upload them for several hours, although individual packages are typically available sooner.

VCRs are no longer widely used, and DVD recording never really caught on for TV viewers, so a cable or satellite provider is the best solution for viewers who want to record programs. For all of these reasons, cable/satellite providers still have some advantages.

Disputes Affect Viewers

While retransmission fees are an excellent source of revenue for stations, steadier than advertising, many stations have fallen into prolonged negotiations of contract renewals with providers.

More than one station has called the provider’s bluff and allowed it to stop transmitting. National news networks have also used this tactic, for example a 2013 dispute between CBS and Time Warner Cable, where Time Warner went a month without CBS’ programming. While the two companies eventually reached an agreement, Time Warner had already lost customers to competitors.

Know How to Pick Your Battles in the Local Market

The same thing can happen to a local station locked in a dispute with a cable or satellite company. While the station might eventually prevail, the situation can have consequences with a local audience. In May, Granite Broadcasting, owner of WEEK-TV in Illinois, got into a deadlock with cable company Mediacom. By June 11, a deal had been reached, but the station was off-air on Mediacom for almost two weeks.

Meanwhile, in late August, about 5 million Dish Network subscribers lost access to 129 Sinclair Broadcasting stations after a similar dispute over fees. In both cases, the local stations were owned by larger conglomerates that negotiated the retransmission fees and pulled programming when a deal couldn’t be reached.

Repercussions of Fee Standoffs

While the provider might eventually cave to a station’s demands, any time the affiliate is blacked out of a significant provider, it risks losing viewers. Once people get used to watching local news on a different channel each night, they’ll be less inclined to return to yours.

A change of habit isn’t the only reason you have to worry. Watching another station for a few weeks might give the audience a chance to notice your competitor has a fun new segment you don’t have, or a talented new on-air personality. Viewers might worry you’ll be off the provider again if you have another disagreement. They also might end up resenting you for interrupting their programming.

What to Do if It Happens to You

If you’re fortunate enough to be running an independent station that negotiates its own deals with cable and satellite providers, there are serious risks to consider before putting your foot down and insisting on higher fees from a provider. Is negotiating a better deal worth losing viewers? What’s the cost of gaining new viewers or re-attracting strayed audience members?

But most stations are owned by conglomerates, and your station may find itself dealing with a blackout, whether you want to or not. How do you handle angry viewers? How do you deal with potential bad press when the provider tells its customers that your station is “holding subscribers hostage”, as Mediacom did in the Granite/WEEK-TV dispute?

Communicate Your Position to Viewers and Offer Alternatives

While the parent company’s legal department may restrict what your station can say during a blackout, it’s important that you communicate something to viewers. Ask the parent company for a prepared statement from its lawyers that you can post to the station’s website. Viewers shouldn’t have to track down a big conglomerate to find out what’s happening.

Should you mention the blackout on-air? After all, your viewers are mostly people who still get your signal, right? Why make the station look bad?

Unfortunately, viewers will probably already know what’s happened through friends or colleagues who don’t get your station anymore. Refusing to discuss the issue at all can lend credence to the provider’s claims that you or your parent company are to blame for the situation.

If the conglomerate doesn’t forbid any discussion of the blackout, it can be a tough call. If you do choose to address the situation on air, you should briefly explain that your station is working to resolve the situation as soon as possible. More detailed explanation is not necessary. Quickly move on to alternatives for viewers who aren’t currently receiving a signal, like indoor antennas.

Prepare for Phone Calls and Emails

If you can’t discuss the situation on air, or choose not to, the receptionist or phone operator at your station should be given a list of suggestions for viewers who call; links to watch prime-time programming online, where they can buy an inexpensive antenna, a YouTube video explaining how to set up an antenna, etc.

The same list will be helpful when the station receives emails from viewers who have similar questions.

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