Home > Uncategorized > Who Should Pay Whom in Broadcast Retransmission?

Who Should Pay Whom in Broadcast Retransmission?

A recent Los Angeles Times blog discussed the FCC looking into taking some control over disputes between Broadcasters and Cable Networks when it comes to retransmission rights. The move was cheered by the cable industry, which has been asked by broadcasters to pay severely higher retransmission fees than in the past.

Last year, ABC pulled its network from Cablevision during a high-profile  dispute that left many viewers hanging in the balance until service was restored just before the 2010 Academy Awards. This fall, a similar dispute between Fox and Cablevision arose leaving Philadelphia fans unable to watch the Phillies in the National League Championship Series. In both of these cases, the broadcast networks were asking for exorbitantly high fees from the Cable providers, which resulted in a stalemate. Eventually, compromises were reach which will inevitably trickle down to the consumer in the form of higher subscription fees for cable television.

But in the world of broadcast retransmission, why should cable providers be paying anything for retransmission rights?

The broadcast networks generate most of their revenue from advertising, both local and national. The commercials and in-show product placement that are the result of those ad streams, are exactly the same whether they are viewed through set-top reception (rabbit ears, or an antennae), or through a cable provider. The cable providers receive no revenue from those ad streams. The broadcast content is also available to anyone for free by using set-top reception.

Why does this model make no sense? Let’s apply this concept to another similar business: newspapers.

A newspaper, like a broadcast network, generates its revenue through advertising. Now let’s say that a small newspaper suddenly had the opportunity to expand its readership through a new delivery service. Let’s say a new railroad that can move through the state at high-speed can now carry this paper further, bringing it into more homes than it has ever been in before. It expands its viewership, and it does a better job of delivering the paper than the newspaper company’s own distribution service could. Ad revenues go up, and the newspaper is making more money than ever before.

Well, under the broadcast retransmission system that currently exists, the newspaper would then turn around and charge the railroad for helping to deliver its core product to a wider audience. It makes no sense. If anything, the railroad should charge the newspaper a handling fee for delivering its content, not the other way around. Similarly, cable providers should be charging the networks a bandwidth fee for delivering their signals through their digital networks.

The entire idea of increased broadcast retransmission fees is an outdated concept from an old school of thought. The media today cannot be contained. You cannot control who transmits what to whom, and you shouldn’t try. Revenue needs to be created at the source of transmission, and afterwards be let into the wild.

If I were running a cable network, I would have taken a much simpler route to fix this problem. The hundreds of millions they pay every year in retransmission fees could be eliminated, and they would never face this issue again. Now that every cable subscriber is required to have a digital box to connect their cable to their television, simply build in a broadcast receiver to these units. This way you’re not retransmitting their signal anymore, and your subscribers can receive the broadcast networks effortlessly, and seamlessly in their own homes.

And most importantly, it wouldn’t cost your customers a dime.

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