[opendtv] Texas Broadcaster Pulls Stations Off Cable
- From: Mark Aitken <maitken@xxxxxxxxxx>
- To: OpenDTV <opendtv@xxxxxxxxxxxxx>
- Date: Thu, 13 Jan 2005 14:27:38 -0500
http://biz.yahoo.com/ap/050113/cable_fight_2.html?printer=1
*Associated Press*
Texas Broadcaster Pulls Stations Off Cable
Thursday January 13, 2:12 pm ET
By David Koenig, AP Business Writer
Texas Broadcaster Pulls Its Stations Off Cable Operators in Pay Dispute
DALLAS (AP) -- On a recent Sunday night, Elaine Leiter of Abilene
settled in to watch her favorite NBC television shows, but instead of
getting "American Dreams" and "Crossing Jordan," a Harry Potter film
blazed across her screen.
"I was irritated," Leiter said. "I don't watch much TV, but I'm really
interested in the shows I do watch."
Leiter's TV screen and those of tens of thousands of other viewers in
West Texas and Missouri are the battleground in a fight between a
Texas-based broadcaster and two big cable operators, Cox Communications
Inc. and Cable One Inc.
Cable systems pay to carry programming such as Walt Disney Co.'s ESPN,
but have resisted paying for local over-the-air stations for decades.
Analysts say cable has paid indirectly to carry stations owned by
broadcast giants News Corp. and Viacom Inc. as part of bigger deals to
get cable channels such as Viacom's MTV and Nickelodeon, but independent
broadcasters don't have that leverage.
That's what's surprising about the confrontational -- and risky --
approach of independent Nexstar Broadcasting Group Inc. of Irving, Texas.
Nexstar ordered Cox to stop carrying its station KRBC, an NBC affiliate,
on its Abilene cable system starting on Jan. 1, and KLST, a CBS station
in San Angelo, after Cox balked at Nexstar's demand that it be paid for
their use. Since then, cable subscribers have needed an antenna to get
the stations. The same situation exists for Cable One viewers of
Nexstar's KTAL, an NBC affiliate in Texarkana, and its ABC and NBC
affiliates in Joplin, Mo. Cox also plans to drop the Joplin stations at
the end of this month.
Atlanta-based Cox, the nation's third-largest cable operator with 6.3
million cable subscribers, replaced the stations with HBO Family, which
is how Leiter, a secretary who once worked at a TV station, stumbled
across Harry Potter.
Nexstar operates 27 television stations, mostly in medium-sized cities
from Texas to Indiana. It has grown rapidly through acquisitions, but
has lost more than $180 million since the beginning of 2001 and is
trying to pay down $600 million in debt, more than its revenue over the
past four years for which it has reported complete results.
Duane Lammers, Nexstar's chief operating officer, said the company is in
solid financial health but faces costs such as meeting a future
requirement to convert to digital and must be paid for its signals.
"We just happen to be the first company that had this drop in our lap,
but it's going to become an all-out war or our industry is going to go
out of business," he said.
While disputes over payments have led cable systems to drop some cable
channels for a few days, skirmishes with broadcasters are less common
and most end with the TV station backing down.
"If they withhold their signal from cable, their ad revenue falls by 75
percent or so" because the audience shrinks to those with antennas or
satellite, said Craig Moffett, an analyst with Sanford Bernstein.
Advertisers pressure the broadcasters to back down, he said.
There have been no negotiations since the Nexstar stations went off
cable at the start of the year. Both sides predict the outcome could
have far-reaching implications when hundreds of local stations around
the country negotiate new 3-year agreements with cable operators this fall.
"If the outcome of this is that Nexstar gets paid, we may see more
broadcasters going this way," said Tom Basinger, a vice president of
Phoenix-based Cable One, which is owned by the Washington Post Co. and
has more than 700,000 customers in 19 states.
To Lammers, the Nexstar executive, it's simple: If cable companies take
his stations' signals and resell them to viewers, "It's only fair we get
a piece of that."
Nexstar wants the cable companies to pay 30 cents per month per
subscriber to carry each station for the next three years. "That isn't
anywhere near gouging," Lammers said. He said that's about what
satellite systems pay Nexstar for so-called "carriage."
Connie Wharton, West Texas general manager for Cox cable, said Nexstar's
demand would cost her company $1.7 million a year and force it to raise
rates, which already average around $50 a month. She said broadcasters
shouldn't charge cable systems for a signal they give away on the public
airwaves.
"The government designates this as a free over-the-air signal," she
said. "Non-cable customers don't pay for it, and our customers shouldn't
either."
Broadcasters around the country are watching the dispute and rooting for
Nexstar.
"It's a fairly brave action by Nexstar," said Barry Faber, general
counsel of Baltimore-based Sinclair Broadcast Group Inc. "I don't
understand why the cable companies pay to distribute cable programming
like HGTV or Animal Planet and they won't pay us."
Under rules in place since 1992, local TV stations can demand that cable
carry their signal -- for free -- or require cable operators to get
their consent for retransmission, which is the approach that Nexstar took.
John M. Higgins, business editor of Broadcasting & Cable magazine,
predicted that Cox and Cable One will prevail because they can endure
unhappy customers longer than Nexstar's stations can tolerate car
dealers and other big advertisers who are angry about losing part of
their audience.
Still, regulatory changes could help broadcasters. A few years ago, most
viewers with satellite dishes couldn't get local channels, which was a
powerful incentive to call the cable company. Since 1999, however, News
Corp.'s DirecTV, EchoStar Communication Corp.'s Dish Network and other
satellite providers have been allowed to offer local channels. They
typically pay stations 15 cents to 20 cents per subscriber each month to
carry their signals.
Since almost a quarter of households that buy TV services get them from
satellite, local broadcasters may feel they can be more aggressive in
negotiation payments from cable operators.
But in the case of Nexstar, there are signs that the dispute is hurting
both sides. Lammers acknowledged that Nexstar stations have lost a
handful of advertisers because they play to smaller audiences without
cable. And local satellite-TV dealers in Abilene, where Cox is the only
cable provider, and Joplin say they have seen an uptick in dish business
since the dispute started.
Nexstar has run advertisements on its stations and in newspapers, urging
viewers to switch from cable to satellite TV. Cox and Cable One have
fired back with their own ads blasting the local stations.
Larry Bradshaw, who teaches radio and TV broadcasting at Abilene
Christian University, said the local stations are valuable to cable but
that cable provides a better picture than using rabbit-ear antennas. He
wrote a letter to the editor of the Abilene newspaper, proposing that
Cox pay Nexstar and both agree not to raise rates to each other or the
public for three years.
He hasn't heard back.
--
Regards,
Mark A. Aitken Director, Advanced Technology
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