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Start Talking Cents

2/23/2007 07:00:00 PM Eastern

As CBS proved last week, TV stations are also valuable cable channels.
And now, with new retransmission-consent agreements that the CBS, Sinclair and
Nexstar broadcast groups have wrangled out of cable operators, it's a sure
bet other broadcasters will be insisting on cash as well.

We think it's fair for broadcasters to negotiate for compensation for
their highly rated content on cable, just like cable networks do. And we would
discourage the FCC from intervening in such market negotiations absent a
showing of bad-faith bargaining.

While the audience watching cable networks usually exceeds the total
audience for the Big Four, broadcast networks are still, as a rule, the most
popular individual channels on cable systems. Operators of cable systems pay
for MTV and ESPN and TV Land (which is a collection of old broadcast TV shows.)
Is it so outlandish to suggest that they pay for ABC, CBS, NBC, Fox and the
rest?

CBS Corp. President/CEO Leslie Moonves, who has banged the loudest on
the retransmission-rights drum, last week was able to brag that he's wrangled
retrans consents from nine not-very-big cable operators. They collectively
deliver programming to over a million subscribers, which isn't even enough to
constitute a 1 rating in Nielsen terms.

It's not a huge deal by itself, but Moonves had vowed not to settle
for less than 50¢ per subscriber per month. Apparently, he got what he
wanted, and he also reaped the news stories that said he got what he wanted.
Cable operators from Bangor to Bakersfield got the message.

One Wall Street analyst says that by 2010, as CBS negotiates completes
retrans deals, the network could garner $240 million.

Cable systems will tell subscribers that their bills will go sky high
because of the greed of their local stations. If they desired, they could
mention the “greed” of ESPN, just to be fair. Greed in some interpretations
is just known as the price the market will bear.

We have sympathy for the smaller cable systems, or ones in smaller
markets, where stations can risk a retrans battle without courting financial
ruin. In bigger cities, dominated by the biggest cable systems—Time Warner
Cable and Comcast—stations will have a tough time playing hard ball. Moonves
likely wouldn't risk yanking CBS stations off of big-market cable systems.
That would cost the network too much in lost advertising. But Sinclair didn't
get stung too badly taking its station off a Medicom system in Paducah, Ky.

If both sides are smart and fair about retransmission, cable operators
and broadcasters will see through their rancor without holding viewers hostage.
But if they don't negotiate sensibly, they'll invite a much heavier hand
from Congress and the FCC.

Neither broadcasting nor cable can afford that.

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