[opendtv] Re: White paper from CEA

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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