PAY-TV broadcast fee fights grow complex
Directv-viacom battle just one front in struggle over programming costs
Things are breaking bad between TV programmers and pay-TV providers. Viacom TV series — such as Tosh.0, The Daily Show and even Dora the Explorer — aren’t playing on DirecTV because the TV programmer and satellite TV service remain in a standoff over broadcast fees.
Fans of the AMC TV series Breaking Bad could not watch the debut of the show’s fifth season Sunday night on Dish Network because AMC and Dish hadn’t resolved a fee skirmish that began July 1. To placate viewers, AMC streamed the show live online at AMCTV.com.
Don’t expect the relations to get rosier between programmers and pay-TV providers. Networks are looking for increased programming fees from cable, satellite and other pay-TV services to pay for shows and, of course, to boost their revenue.
Meanwhile, pay-TV providers have to juggle increased programming fees and flattening growth in the number of pay-TV households. DirecTV, for example, spent about $9.8 billion on programming in 2011, up 12.6% over 2010.
Passing programming costs directly to consumers could ignite a wave of subscriber “cord cutting” — dropping pay-TV services — and of their turning to Internet video. So far, that hasn’t happened in a big way. Pay-TV homes remain stable at 101 million, about 84% of TV homes, according to IHS Screen Digest. But “something has got to give,” says Tom Adams, an analyst at the market research firm.
Current government regulations including the 1992 Cable Act were not meant for the post-Netflix era, Dish Network Chairman Charlie Ergen argued last month before a U.S. House subcommittee. “Broadcasters play the pay-TV providers against one another,” he said.
Consumers get caught in the middle and usually wind up paying higher bills, Ergen said. “And, the problem is only getting worse.”
The problem is bad enough that even competitors are joining forces. Viacom’s demand for increased fees from DirecTV “is a reflection of an unbalanced multichannel video business model,” said Cox Communications’ Bob Wilson in a statement after DirecTV had to pull Viacom’s channels off its system. (A total of 17 networks and 26 channels were removed including BET, Comedy Central, MTV and Nickelodeon. Negotiations continued over the weekend.)
As more problems bubble up in the industry — Time Warner Cable customers in 11 markets are currently without local Hearst network affiliates in another rate dispute — multiple arms of the government are looking to get involved.
The Federal Communications Commission has said it plans to take up the issue of retransmission of broadcasts by pay-TV operators. Sen. Jim DeMint, R-S.C, and Rep. Steve Scalise, R-La., have introduced a deregulation bill. And the Justice Department has contacted pay-TV providers as part of its probe into whether they are trying to thwart the success of Netflix and online video sites by capping data limits, The Wall Street Journal recently reported, citing unnamed sources. DOJ declined to comment. “We are glad that the Justice Department is getting involved,” says John Bergmayer, senior staff attorney for Public Knowledge, which thinks the FCC should update its policies.
The disputes are hot topics on social media, specifically Twitter, with Viacom especially catching flak. That could help resolve at least the DirecTV-Viacom standoff.