While the nationally watched battle between Fox TV and Time Warner Cable eventually worked out last week, it may be a preview of things to come.
Local TV stations, the national networks and all manner of television providers — cable, dish, Internet, etc. — are rethinking and redoing contracts. At the heart of it is who pays for content and how much.
Stations now want a bigger part of the providers’ profits, arguing that cable companies can generate revenue through ad sales and subscriptions while stations only have ad sales.
Also at issue is what the future holds as more consumers want to be able to watch what they want, when they want it and how they want it.
While local television stations and providers such as Comcast and Charter Communications have similar discussions whenever contracts are up for renewal, officials here say talks have never come close to the threat of “going dark” — a network pulling all its programming from a provider — as they did last week with Fox and Time Warner subsidiary Bright House Networks.
“The consumer loses in a situation like that and that is the last thing we want,” said Nick Pavlis, state director of government relations for Charter Communications, which provides cable service in Cleveland, Tenn., and North Georgia. “None of ours went dark as we were able to come to an agreement.”
Officials with Comcast Cable — the largest cable provider in Chattanooga — said all retransmissions negotiations are handled on a corporate level.
“I can tell you that on the local level, we have a great relationship with all of the GMs at the local network affiliates,” said local Comcast spokesperson Laurie Shipley.
At Ringgold Telephone Co., which offers cable TV to about 1,600 subscribers, the negotiations were handled locally. Regulatory Manager Mike Wallin said the retransmission fees increased for the first time three years ago.
“It was an increase and, of course, costs rise and the margins are so small that it doesn’t have to be much to be business affecting,” he said. “Some companies pass it along, but so far Ringgold has eaten that cost.”
He said he expects the retransmission fees to go up next year when a new contract is negotiated, but he said he could not predict how much.
EPB’s fiber optic network is the new player on the block and Vice President Katie Espeseth said last year’s contract negotiations went as expected.
“We had estimated that we would have to pay the locals a certain amount and we did,” she said. “There was give and take on both sides.”
To understand what has changed in the world of TV, “you need to go back,” said WTVC General Manager Mike Costa, whose parent company, Freedom Communications, is in the process of finalizing contracts with all of its providers in the area.
For years, he explained, cable companies and local stations operated under the understanding that each provided something valuable to the other. The local stations provided content that local subscribers wanted and the cable companies put that programming into homes with a clear picture.
“Cable does us a great service — particularly in the terrain we are in being as mountainous as it is — in getting us into some areas with a good clean signal,” Mr. Costa said.
In some parts of the country, the local stations gave the cable companies retransmission rights for a minimal fee or in return for preferred placement on the cable channel lineup.
That relationship worked fine for years, he said, but as advertising revenues have dropped lately, networks and local stations have taken a closer look at the revenue stream and realized that the providers have an advantage — they can sell subscriptions and they sell advertising, he said.
“We make our money basically selling ads,” Mr. Costa said. “The broadcaster’s argument is that if you didn’t have our content, your subscription would not be as valuable.”
Cable operators say they understand that it costs money to produce programming and networks and local stations want some way to cover those costs.
“The broadcasters value their product,” Mr. Pavlis said. “We understand that.”
In many cases, the current dispute centers on the amount of the retransmission fees — what a network gets paid by cable and other providers for using its programs.
In the Fox-Time Warner dust-up, Fox reportedly wanted Time Warner to pay $1 per customer to retransmit the network’s programming, a higher amount than the previous contract. Time Warner balked and Fox threatened to pull all its programming from Bright House.
The two eventually reached an agreement, but details have not been publicly released.
Mr. Pavlis said Charter renegotiates contracts every three years and that the local contracts were last done in 2008.
Freedom Communications has contracts with satellite providers Dish Network and DirectTV, as well as cable providers Charter, Comcast, EPB and smaller providers in outlying areas, Mr. Costa said.
While having several providers in the area makes contract negotiation a little more complicated, “it gives the consumer a choice,” he said.
It also provides a bargaining chip for the local stations as consumers might look less favorably on a provider that doesn’t have all of the local stations, he said.
According to a report on huliq.com, an independent news organization, most local broadcast TV stations receive 25 to 50 cents per subscriber from cable companies. By comparison, ESPN reportedly makes about $4 per subscriber.
EPB’s Ms. Espeseth said that as part of the contracts, some networks require that certain additional channels are part of the deal.
“People often ask why we don’t offer a la carte choices on channels,” she said. “It is specific to these agreements.”
Area television providers
Chattanooga Comcast, Charter Communications, Dish Network, DirectTV, EPB Fiber Optics
The future
Advances in technology continue to change how and when consumers watch television. From over-the-air to cable to satellite to the Internet and now Smartphones, broadcasters and providers are trying to stay ahead of the curve. Some believe the upcoming Apple Tablet could provide television programming and mobile digital TV could soon become an option for automobiles.
“I think it goes to the broader picture,” said WTVC General Manager Mike Costa. “The consumer is demanding the product when they want it and how they want it. With the Internet and electronic devices, people are not set to a schedule. We have to make sure our product is available when they want it.”