[opendtv] News: Is Retrans Cash Viable?

Is Retrans Cash Viable?

April 28, 2005 12:00am
Source: Reed Business Information. All Rights Reserved.

Multichannel News:

Viacom Inc.'s CBS Television Network is likely to seek cash for 
carriage from cable operators for retransmission consent in the years 
following the media company's planned division into two separate 
operating units, company officials told analysts last week.

Viacom announced in March its plan to cleave itself into two 
separate, publicly traded units, one company consisting of its MTV 
Networks cable channels and studio Paramount Pictures, the other 
including its CBS and UPN broadcast networks, its TV stations, radio 
properties and outdoor advertising. The MTV Networks unit will be led 
by Viacom co-president and co-chief operating officer Tom Freston. 
Viacom co-president and co-COO Les Moonves will head up the other 
division.

PLAN ON TRACK

In a conference call April 19 with analysts to discuss first quarter 
results, Viacom chairman Sumner Redstone said that plan is moving 
forward.

Redstone said the company should make a decision on the separation by 
the end of the current quarter. The split could be completed by the 
first quarter of 2006, he said.

Asked what would happen with retransmission consent once the spinoff 
is completed, Moonves said it presents a perfect opportunity to start 
getting cash for carriage from cable operators.

"We think there's a real possibility that CBS will be able to 
generate cash for our retrans," Moonves said on the call.

Cable operators have largely resisted paying cash for carriage of 
broadcast networks. And the four major broadcasters have largely used 
retrans to force operators to carry their less-popular niche networks.

However, on the conference call, Freston said that Viacom's cable 
networks don't expect to get that much benefit from retrans in the 
future.

"Retrans has been a great value to MTV Networks over the last five 
years since we merged with CBS as we've been able to mop up all kinds 
of analog and digital space coincident with the cable operators 
rolling out their digital-network platform," Freston said. "We think 
that game is largely over. Most of our deals are done until the end 
of the decade. Cable operators will be focusing more and more on VOD 
and broadband."

Moonves said that CBS will not likely see cash for carriage for 
several years, mainly because most of its deals won't expire for a 
few years.

"Nothing is going happen until these deals expire, some of them are 
coming up in the near future," Moonves said. "As we go forward 
post-split, we think in the next three to five years it [cash for 
carriage] could be worth tens of millions of dollars to the CBS 
network."

OPS GIRD FOR FIGHT

But CBS shouldn't begin spending that retrans money yet. Cable 
operators, loath to pay cash for retransmission in the past, appear 
to be gearing up for a fight.

Last week, more than 55 cable companies, independent programmers and 
national organizations filed comments with the Federal Communications 
Commission in support of the American Cable Association's call for 
reform of retransmission-consent rules.

The ACA, a lobbying group for independent cable operators, in March 
filed a petition with the FCC asking the body to examine and change 
regulations used by the Big Four TV broadcast networks - including 
CBS - and TV-station groups to allegedly prop up the price of 
retransmission consent. The ACA charged that cash-for-carry 
retransmission-consent demands could cost the ACA and its customers 
an estimated $1 billion if current rules aren't changed.

The ACA petition has drawn comments in support from the National 
Cable and Telecommunications Association, the National Cable 
Television Cooperative, Court TV, Hallmark Channel, Mediacom 
Communications, Cebridge Connections, Atlantic Broadband, Millennium 
Digital Media, Armstrong and Susquehanna Communications.

"Retransmission consent is simply outdated regulatory policy - it 
precludes the television distribution arena from operating 
equitably," Robert Rose, Court TV's executive vice president of 
affiliate relations, said in his network's comments.

The FCC last month released the petition for public comment to the 
ACA filing, with comments due last week.

"The regulations identified by the ACA, particularly 
retransmission-consent provisions, may cause adverse marketplace 
consequences, including further difficulty in launching and 
distributing new services, because cable operators forced to divert 
substantial payments to broadcasters have less to spend on new, 
independent programming," Paul FitzPatrick, Crown Media's executive 
vice president, said in Hallmark's comments.

Regarding the filings in support of the ACA, president and CEO Matt 
Polka said, "This enormous record and response from across the 
country shows that retransmission consent is not working well for 
consumers, cable operators or the public interest."

ACQUISITION TARGETS

While cash for retrans is still up in the air, Freston gave some 
insight on possible acquisition targets for the MTV Networks division 
after the planned split.

"If a cable network comes up for sale, particularly something that 
has an older skew where we have less inventory than kids, teens and 
young adults, we would be very interested," Freston said. "It's going 
to depend on the quality of the network and of course on the price. 
We're also looking at acquisitions [in] smaller, largely Web-based 
companies that would enhance our existing web businesses in the 
demographics we appeal to. Those would be things around video games, 
community sites and things of that like."

For the quarter, Viacom reported revenue growth of about 5% to $5.6 
billion and cash flow rose 6% to $1.3 billion, mainly because of 
strong performance at its cable networks. Cable network revenue was 
up 19% in the period to $1.7 billion while cash flow increased 17% to 
$695 million.

<<Multichannel News -- 04/28/05>>

<< Copyright ©2005 Reed Business Information. All Rights Reserved. >>
 
 
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