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I had hoped that the retransmission fee fight between Dish Network and Tribune Broadcasting would be over quickly, but if anything, it’s grown worse. Dish offered baseball-style binding arbitration. Tribune countered with ads blaming Dish. Then Dish sued over the ads. I recognize that these steps are all about adding bargaining chips toward a final settlement, but it’s all so unnecessary.
The primary cause of the problem is that over-the-air TV broadcasters get to
demand negotiate retransmission fees from pay-TV providers. (That’s if they’re popular. If a station isn’t popular, it can instead demand that pay-TV providers must carry that station no matter how few viewers want it.) These stations, granted the license to use the public airwaves to serve their communities, can withhold their programming from cable and satellite unless those viewers pay up.
TV stations have all the leverage. If one pay-TV company balks, the station can urge viewers to switch to another, and that’s exactly what Tribune has done. A media conglomerate that controls both cable networks and OTA stations can use retransmission fee negotiations to force the providers to carry the networks or raise those prices too. That’s also what Tribune is doing.
It’s no wonder that stations reject calls for arbitration or any other changes to the current system. If you’ve got the only oasis for 100 miles, you won’t be interested in negotiating the price of water. No wonder that, according to SNL Kagan, total retransmission fees have risen from $200 million 10 years ago to over $7.7 billion this year and are projected to reach $11.6 billion by 2022.
In my ideal world, part of TV broadcasters’ social contract would include allowing anyone to retransmit any OTA station for free. That’s not going to happen. Heck, even the United Kingdom is considering allowing such fees. But I’ve got a solution that’s almost as good.
Consider music. When someone wants to play Yesterday, they don’t need to negotiate with Paul McCartney. There are rights organizations that have negotiated fair-market royalty rates with representatives of the parties that use music.
Now apply that to OTA TV. Suppose that the major networks and other TV ownership groups sat down with the cable and satellite TV companies. They could negotiate a formula that provides fair-market retransmission fees for each station. I imagine that the formula would be based on the average number of viewers, with a certain no-fee threshold for must-carry stations. If average ratings go up over a year (or quarterly), that station earns a higher fee from the pay-TV service. Every few years, the parties sit down and hash out any changes. Everyone benefits by saving all the time and money currently spent negotiating each station group’s demands with each pay-TV service. No OTA station ever gets blacked out on any provider, yet everyone gets a fair return.
This too will never happen without government intervention. Even with assurances of a fair return on OTA fees, conglomerates would lose the leverage to force better terms for their cable channels. But this plan might just be balanced enough to work if viewer groups and pay-TV lobbyists ever get together to lean on Washington. At the very least, it’s a pleasant dream.