Hearst-TWC, Viacom-DirecTV Carriage Disputes End

Nexstar’s FCC carriage complaint against Time Warner Cable (CD July 16 p5) for importing the signals of three of that broadcaster’s TV stations into the cable operator’s systems during the Hearst blackout remains pending. Nexstar isn’t withdrawing the complaint because of the settlement, nor is it ending a lawsuit in the U.S. District Court in the Northern District of Texas (CD July 19 p21) against the cable operator over the signal importation, a spokesman for the broadcaster said. But the commission isn’t expected to act soon on the complaint, said industry lawyers not involved in the case. The agency hasn’t acted on a 2010 complaint the broadcaster filed against the operator over a similar practice during another blackout.

None of the deal terms were disclosed, but a report from Bloomberg pegged the value of the Viacom-DirecTV agreement at $600 million and a 20 percent increase. A DirecTV spokesman said the channels were restored about 4 a.m. Friday. The Disney Junior Channel, which DirecTV picked up July 10, will continue on Channel 289, filling a slot previously occupied by the NASA Channel, the spokesman said. The DBS company has no plans to carry the EPIX channel, he said. DirecTV has the option to add EPIX to its programming lineup as part of the carriage agreement, Viacom said Friday.

The disputes marked a change in how customers perceive programmers and distributors, said some executives representing smaller multichannel video programming distributors. “Viacom, rather than the distributor, was perceived, more appropriately, as the cause,” said Robert Gessner, Massillon Cable TV president. This may have been a “watershed moment for the industry,” he said. “DirecTV may have had a very good message that resonated with consumers that said we're trying to give you more choices and Viacom is not.” As the consumer-facing entities, distributors often found it difficult to convince their customers that TV programming is expensive and increasing in price, Gessner said. The supposed change in consumer interpretation “may become a larger rallying cry in future negotiations,” he added. In the latest disputes, consumers get it, said Matt Polka, American Cable Association president. “They understand that this stuff costs a lot of money and it’s not my provider, whether it’s cable or a satellite provider, that’s responsible for it.” DirecTV succeeded in demonstrating the behavior of Viacom, he added.

There are still only two options in the retrans dispute issue, said Bruce Beckner, a Garvey Schubert lawyer who’s represented cable operators in carriage disagreements. The regulator or arbitrator can make a deal for the parties trying to reach an agreement, or there’s the free market model where “the parties negotiate and they either come to an agreement or they don’t,” he said: The FCC “could take steps to make sure they at least talk to each other ... and the FCC has promulgated rules about that.” Beckner said the free market model is favorable considering the complexity of the disputes. In the DirecTV and Viacom dispute, “there may have been some customers who are really big fans of the channels that were the subject of the Viacom dispute, but other people may have never watched them,” he said. “As messy and complicated as the situation is, there’s not a simple solution out there that somebody can pull out of a magic hat."

To backers of carriage fees, the two deals show disputes are resolved, they said. “What the entire process connotes is a realization that content owners get to be paid for their content, over whatever platform,” said General Counsel Jerald Fritz of Allbritton Communications, owner of WJLA Washington and six other ABC affiliates. “Because of the confluence of the separate platforms and the competitive nature of the platforms, now we are seeing that the marketplace works.” If one MVPD doesn’t want to pay a carriage fee, “another platform will,” Fritz said: “That was the original intent of retransmission consent” passed by Congress in the 1992 Cable Act.

The resolution came days before the Senate Commerce Committee is to hear Tuesday testimony from cable operators, broadcasters and programmers about the enduring utility of the Cable Act (CD July 17 p4). Retrans consent and programming costs are expected to be among the issues discussed, and Time Warner Cable Executive Vice President Melinda Witmer is among the witnesses scheduled to appear.

Retrans isn’t different than other businesses in that disputes over pricing occur, said Preston Padden, a former broadcast and cable executive who’s now a fellow at the University of Colorado’s Silicon Flatirons Center. “It’s very common in every line of commerce for there to be disagreements between buyers and sellers over price, and this situation we're seeing in television is like other garden variety disagreements over price, and they get resolved,” he said. Stations unavailable on an MVPD remain available terrestrially, and Viacom’s channels have competitors in companies including Disney, where Padden used to work, he said. “There’s good substitutability for all of these channels.” Padden testifies Tuesday

Broadcasters defended retrans rules in letters to Senate Commerce Chairman Jay Rockefeller, D-W.Va., sent Friday. The NBC TV Affiliates Board laid the blame for higher cable rates squarely at the cable industry’s feet. “Meanwhile, over the last decade, MVPDs have raised subscriber rates aggressively,” wrote Ralph Oakley, the board’s vice chairman for government affairs (http://xrl.us/bnhkh8). “But these hikes were not attributable to changes in retransmission consent payments to broadcasters.”

The number of carriage impasses tends to spike “whenever the pay-TV industry senses the possibility that Congress of the FCC might undercut the retransmission consent principle,” Oakley wrote. “This is because MVPDs may want to cite service disruptions to bolster their case for government intervention.”