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Band of colluding broadcasters?

Station groups seek ways to make more money from free TV 11/04/2001 07:00:00 PM Eastern

In 1996, the Justice Department declared that the Big Three affiliates in Corpus Christi, Texas, violated antitrust laws by refusing to grant re- transmission rights to the local Tele-Communications Inc. system until each had inked a deal.

Justice officials found that KRIS-TV, KIII-TV and KZTV-TV conspired to raise the prices charged to TCI by refusing any retransmission deal that gave a competitive edge to any station.

"They must not band together and collude in their dealings with cable companies," Assistant Attorney General Anne Bingaman said at the time.

Fast forward to today. Caught between a tanking economy and the expensive transition to digital, stations need every dollar they can get, and that may mean asking the Justice Department to allow them to "collude" in order to get maximum value for their signals.

Two weeks ago, the heads of some of the country's largest affiliate TV station groups met in New York to talk about new ways of doing business in a world where viewers are willing to pay for programming, rather than relying on traditional free, advertising-driven TV.

Included in the group were Emmis Communications' Jeff Smulyan, Post-Newsweek Stations' Alan Frank and Hearst-Argyle's David Barrett. Cox's Andrew Fisher, reported by BROADCASTING & CABLE last week to have been in the meeting, did not attend.

Smulyan and his companions aren't saying what strategies they came up with. "This was one of a series of informal discussions about the future of the business," he said last week, noting that they were "at the start of a long dialogue." But sources say collective bargaining for retrans could land on the agenda, if it isn't already there.

Tops among broadcasters' concerns is creating a secondary revenue stream to make up for disappointing growth in ad revenue. One idea Smulyan has been advocating is getting more compensation from cable operators for carriage of stations' signals.

Currently, few cable companies pay affiliates and independent stations outside the top markets for the right to carry their signals. Most smaller stations opt for must-carry because they can't risk losing carriage if negotiations fail.

Stations owned by the big networks don't face the same dilemma because their parent companies also own major cable channels such as the Disney Channel, ESPN and MTV and include their O&Os in lucrative package deals.

Negotiating retransmission fees as a group won't be easy. After all, the tactic is illegal, and policymakers don't appear inclined to go easier on broadcasters.

Broadcasters have tried to win antitrust exemptions before, most notably during negotiations over the 1996 Telecommunications Act.

Broadcasters then tried to persuade lawmakers to write into law either a blanket exemption or, failing that, an "if-carry/must-pay" law requiring cable operators to compensate according to market size.

But lawmakers are wary of antitrust exemptions, a sentiment that, coupled with furious lobbying against the measures by the cable industry, continues to make prospects for change very dim.

Another option for broadcasters would be to persuade the Justice Department not to sue stations on grounds that broadcasters need a leg up against cable operators. But that approach poses risks, too, because cable operators would still be free to sue, charging collusion.

Ironically, broadcasters insist that their antitrust restrictions actually strengthen cable companies' monopoly power.

Cable operators have the upper hand in negotiations, broadcasters say, because they generally have a monopoly in their markets and, nationwide, account for roughly 80% of viewers. Because broadcasters must reach the people who rely on subscription TV in order to entice advertisers, stations cannot walk away from cable carriage and thus have little leverage to drive a hard bargain for carriage rights.

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