Mediacom/Raycom Negotiations Part of High-Stakes Industry Dynamic
Wednesday, July 3rd, 2013
On Friday, June 21, Mediacom Communications Corporation and Raycom Media, Inc., owner of WALB TV, reached agreement on a contract that had been the subject of several messages broadcast to WALB viewers. For weeks, WALB warned Mediacom cable customers they could lose access to the station if an agreement wasn't reached by June 30th, the expiration date of the existing contract.
"The details of these contracts are always confidential," said Mediacom Communications Director Phyllis Peters.
"Essentially in the contract Raycom grants rights to carry WALB and other television stations it owns at a price that is set per subscriber per month. The contracts are typically for multiple years – three, four or five."
The contracts generate retransmission consent revenues for TV station owners. These revenues are essentially fees that cable, satellite and telecommunications companies pay in order to be able to distribute content to their customers.
"I'm happy we were able to come to another three-year agreement, without disruption in service to the public," said WALB Vice President and General Manager Jim Wilcox.
"As our NBC and ABC stations provide 70 percent of the viewing from all other cable channels, WALB is Mediacom's best value in their line-up."
Securing Higher Fees
In 1992, Congress passed the Cable Television Consumer Protection and Competition Act over a presidential veto, which requires cable operators to get permission from stations before retransmitting their signal. However it took nearly 15 years for station owners to gain enough leverage to negotiate significant retransmission fees for their content.
According to SNL Kagan, a research firm in the media and communications sector, broadcast retransmission fees were only $205 million in 2006. By 2011, retrans fees were $1.75 billion, up 42 percent over 2010. SNL Kagan projects retrans fees will reach $6 billion by 2018, a compound annual growth rate of 19.3 percent. According to a Nov. 5, 2012 statement issued by SNL Kagan, "the increased projections are due to the success of a wider range of TV station owners in securing sequentially higher retrans fees from multichannel operators over the last year of negotiated deals."
Retrans fees represented approximately 6.5 percent of local station revenues in 2012, according to research firm BIA Kelsey, second only to advertising revenues. By 2018, retrans fees will reach nearly 10 percent of revenues.
Investing in News Production
According to the National Association of Broadcasters, a national trade group representing television and radio broadcasters, local TV stations rely on the fees to invest in local news production, public affairs programming, emergency event coverage and community activities that benefit viewers.
"In 2011, WALB was named the ABC affiliate for the Albany market. In addition to significant equipment investments and new syndicated programming, we added a Monday-Friday 7 p.m. newscast, which is the only local news provided at this hour," Wilcox said.
"This brings our total news broadcasts to five hours each day. We provide the only local news for two and a half of those hours.
WALB also completed construction of a new HD news set and renovation of a new HD master control room, and now broadcasts all local news in HD, according to Wilcox. In addition, the state installed a live camera/weather station network in four area cities: Tifton, Cordele, Moultrie and Valdosta.
A High-Stakes Dynamic
In the midst of high-stakes negotiations, it has become increasingly common for both sides to appeal to viewers. WALB encouraged viewers to contact Mediacom during its negotiations and provided the contact information for competing distributors – DirecTV, Dish Network and AT&T U-verse – that carry the station's content.
"It's the landscape we live in today," Mediacom's Peters said. "We don't take the first offer out of the gate [in the contract negotiations] and the rhetoric gets up there."
"With Raycom, there was limited leverage this time as there is no Summer Olympics this year. Many times broadcasters will use major sporting events as leverage in negotiations."
Cable, satellite and telecommunications companies are reaching out to their customers to communicate the impact of rising retrans fees. Mediacom, for example, has a website at mediacomonyourside.com that presents their concerns over the rising costs of programming. The company is also communicating its concerns to legislators and regulators at the Federal Communications Commission.
"Our customers say we pay good money for our cable service and we want this channel, but they don't want to pay more for it," Peters said.