Tuesday, October 26, 2010

Unintended consequences of the Cablevision/Fox standoff

The Cablevision/Fox retransmission rights standoff is now more than a week old. Neither the New York Yankees nor the Philadelphia Phillies made it into the World Series, so there's going to be much less demand for Fox in those cities come Wednesday. However, Dish Networks is the next service provider to be threatened with losing Fox's over-the-air stations, and its subscribers in Texas and the San Francisco Bay Area would lose access to the World Series if Fox pulls the plug on November 1st.

I wrote previously about the likelihood that these retransmission battles would result in binding arbitration being imposed, either by the FCC or the U.S. Congress. There might be a different outcome, however. You may recall ivi tv, the Seattle company that's retransmitting over-the-air signals from stations in New York City and Seattle to subscribers across the U.S. over the Internet. Ivi has been sued by just about every broadcast network and programming supplier, but the company is relying on a statute that's been on the books for decades that requires broadcasters to make their signal available to any cable operator, in return for fees paid by cable operators to the U.S. Copyright Office. These fees are then distributed to the broadcasters. In most cases, these statutory license fees are a tiny fraction of what broadcasters are asking for, and getting, from service providers for their retransmission rights.

If enough political pressure is applied, the Congress could repeal the statute that gives broadcasters the right to deny permission for retransmission and the right to ask for compensation. In that case, the law would fall back to the statutory license procedure that's still on the books. It would put local broadcasters that have been relying on retransmission fees for an ever-increasing portion of their income in a world of hurt.

The service providers would love to go back to statutory licenses, even if the license fee was raised substantially. Broadcasters will fight the change with every breath in their bodies. Both sides need to be very careful, because they could end up losing control of the negotiating process.
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