Local Choice Sure Isn't The Logical Choice
Why are Sens. Jay Rockefeller (D-W.Va.) and John Thune (R-S.D.) picking on broadcasters?
The bipartisan duo is behind the Local Choice proposal floated on Capitol Hill last week. Instead of negotiating retransmission consent fees from pay TV operators, broadcasters would hawk their signals directly to subscribers at prices they set. Consumers would choose which signals they want, while pay TV operators manage the transaction and collect the fees for the broadcasters. It would apply only to stations that want to get compensation for carriage. Stations would still be able to opt for must-carry — mandated distribution to all subscribers with no fees attached.
As nutty as it is, Local Choice cannot be totally ignored. Rockefeller is the chairman of the Senate Commerce Committee and Thune is the ranking minority member. That gives it some legs.
But, again, why are they picking on broadcasters? Why are they singling them out?
By my last count, there are 12,467 cable channels, including something called cloo and another something called H2.
If the senators wants to be fair and really empower consumers, they should do it by giving them the ability to choose from among all the channels. This idea has a name — a la carte marketing — and it's been kicking around for years and, by the way, it's been vigorously opposed by cable operators and programmers.
The reason given for Local Choice is to curtail the blackouts that occur when retrans negotiations break down. But if the senators were regular readers of TVNewsCheck and other TV trades, they would know that retrans blackouts are relatively rare and that cable channels are also subject to blackouts when cable operator and programmer cannot agree on terms. The nastiest disputes are over regional sports networks, not broadcast channels.
Adoption of Local Choice would be bad news for broadcasters. Despite their popularity, the Big Four O&Os and affiliates would lose some percentage of their pay TV audience and the advertising and retrans revenue that come with it. I have no idea what that percentage would be, but even 10% or 15% would be terribly damaging. Broadcaster cannot afford to ever have anything less than 100% coverage. It's their advertising edge.
The broadcasters would also have to waste valuable time and resources marketing themselves to subscribers. Worst of all, they would have to rely on pay TV operators to service their paying customers, making sure each one receives the signals they choose and only the signals they choose. Let's just say cable has not exactly distinguished itself in the customer service department over the years.
Broadcasters would also have to rely on the pay TV operators to act as their auditors and collection agents. Another grim prospect.
While Local Choice harms broadcasters, I'm not sure it benefits anybody other than some small cable operators that are being crushed by the retrans burden.
In a column of TVNewsCheck we posted on Tuesday, communications attorney Jack Goodman, one of the founding fathers of retransmission consent, thoroughly dissects Local Choice, showing how it would hurt not only broadcasters, but also consumers and, for that matter, most cable operators.
Despite the proposal's parentage, I'm not too concerned about it becoming law. Not only will broadcasters be working against it, but so will, I think, the big cable and satellite operators. They don't want to deal with the logistics of it, and they certainly don't want to encourage a la carte marketing by letting it take root here.
In an Q&A in The Hollywood Reporter last April, NCTA President Michael Powell once again made the case against a la carte, arguing that it would probably cost consumers more in the end and drive smaller niche channels like black-oriented TV One out of business. "I think the government would be mandating a model that actually might be harmful to consumers," he said.
What does concern me is that Thune is now clearly on the side of those who believe that retransmission consent has to be "reformed." Unlike Rockefeller, who is retiring at the end of this Congress, Thune will be back next year, and if the Republican National Committee has its way this fall, he likely will be chairman of the Senate Commerce Committee.
If Local Choice is not the fix, he'll be looking for another and the pay TV lobby has a bunch of them from which to choose — all bad for broadcasters.
The old Washington axiom is that you can't beat something with nothing. So, the broadcasters need something. That something, I suggest, is arbitration.
To prevent disruption of service and insure that broadcasters are fairly paid, the Congress would pass a law stipulating that if pay TV operators and broadcasters cannot agree on a retrans fee after a certain period of time, the matter would be settled by so-called pendulum arbitration. It would work just as it does in baseball. The pay TV operator makes the case for why the per-sub, per month fee should be X, while the broadcaster makes a case for why it should be Y. The arbitrator simply picks one.