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Retransmission Stalemate: No End in Sight

Battle with KAYU has left Time Warner Cable subscribers in the dark for one year 12/07/2007 07:00:00 PM Eastern

Since KAYU Spokane yanked its signal from Time Warner Cable over a disagreement regarding the right to air the station's signal, Saddam Hussein was executed, the Colts won the Super Bowl, and frontrunners emerged in the presidential race.

All the while, KAYU is still dark on the dial for Time Warner Cable subscribers in the area, making it one of the longest retransmission blackouts in history.

KAYU, owned by Brian Brady's Northwest Broadcasting, went dark on Time Warner Cable systems Dec. 14, 2006, leaving an estimated 32,000 homes without their local Fox outlet. Both sides appeared to be close to an agreement last spring (Station to Station, May 28), and were hopeful about working things out before Seattle Seahawks pre-season football games kicked off on KAYU last summer.

Pre-season football has come and gone, the regular season is winding down, and there's still no agreement between the feuding parties. “It's certainly gone on longer than other [recent] retransmission consent situations with [Nexstar] and Sinclair,” says KAYU VP/General Manager Jon Rand.

Broadcasters everywhere are identifying retransmission consent—cable companies reimbursing broadcasters for offering their channels to subscribers—as a growing source of revenue. Last month, LIN TV announced a 134% increase in digital revenues in the third quarter, compared to the third quarter the year before, thanks in large part to fees the company retrieved from retransmission consent.

Hearst-Argyle recently nailed down an agreement with Cox that contributed to an 18% increase in retransmission consent revenue (to $5.6 million) in the third quarter of 2007, compared to 2006. “With a majority of our retransmission agreements coming up for renewal at the end of 2008 and during 2009, we anticipate future retransmission revenue growth,” read the Hearst-Argyle quarterly report.

Nexstar Broadcasting, meanwhile, cited retransmission consent as a primary reason why third-quarter 2007 numbers surpassed their 2006 counterparts, despite the lack of political advertising this year. Nexstar has done recent retransmission deals with Cox and Verizon.

Sources close to the Time Warner Cable/KAYU negotiations are, in fact, optimistic that the parties will work out an agreement and get KAYU back on the Time Warner Cable system in the coming months. “Something is underway, and I guess it's a positive step forward,” says Rand. (It's worth noting that insiders have spoken optimistically of the negotiations several times before.)

KAYU owner Brady insists money has to change hands for the deal to get done. “Broadcasters need to get paid—and get paid cash—for retransmission rights,” he says.

Time Warner Cable spokesperson Maureen Huff confirmed that “negotiations are ongoing,” but would not provide detail. She said the cable company has been reaching out to its affected customers with thousands of pairs of rabbit ears to help them receive the station signal over the air, and that the social nature of football and even American Idol has pushed people to view these TV events at friends' homes and bars.

Both parties are, not surprisingly, quick to tweak the other for the prolonged detente. Huff says Time Warner Cable, with 13.3 million subscribers across 33 states, has a positive track record with broadcasters in terms of good-faith negotiations. “This is far and away the longest retransmission issue we've had in recent memory,” she says.

Rand warns that Time Warner Cable will see a dramatic subscriber exodus if the deal isn't worked out in time for the Super Bowl, slated for Feb. 3 on Fox. (In first place in the NFC West, the local Seahawks could win a spot in the big game.)

“The customer base at that point would probably figure there's just no hope for their cable system,” he says, “and would probably seek out another provider.”

KAYU tallied the fourth highest revenue in No. 77 DMA Spokane in 2006, according to BIA Financial. Despite being dark in thousands of cable homes, Rand says KAYU has actually enjoyed its strongest ratings book in the history of the station in May, thanks to carriage on other cable operators such as Comcast and Charter, satellite TV, and over the air. (He says the Time Warner Cable households represent 3% of the total viewing area.)

While numbers from the November sweeps are not available until later this month, Rand is optimistic they'll be robust, too. “We think we're going to come out of November really well,” he says.

Time Warner Cable, meanwhile, is keeping local subscribers apprised on the “Northwest” section of its Website. “We still hold out hope here locally the agreement can be signed soon,” the latest letter reads. “It's been a drawn-out process and we appreciate your patience with this situation. Most of you have stuck by Time Warner Cable and you can't begin to imagine how appreciative the local staff is for your loyalty, as tough as it may have been through the months.”

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michael.malone@reedbusiness.com

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