The Book of Ironies

The shifting fortunes of retransmission consent
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It is hard to top last week's revelation about Bill Bennett for irony. This guy writes the Biblical-sounding The Book of Virtue
and gives speeches to the self-righteous about how swell it is to be virtuous. Then, Newsweek and The Washington Monthly report that the former Secretary of Education and drug czar is a closet gambler, sometimes losing hundreds of thousands in Las Vegas and Atlantic City.

The story, however, does confirm Bennett's basic dorkiness. His games of choice are (or were) video poker and slot machines, games he could play alone over there with the chain-smoking old ladies. This may give some comfort to those who forked over big bucks ($50,000, Newsweek
says) to hear him preach. They can tell themselves that at least he wasn't doing the hard stuff like craps and blackjack.

Yes, it's hard to top Bill Bennett for irony, but let's revisit retransmission consent, which, I believe, has produced the rare double-reverse irony.

In 1992, TV broadcasters won a great victory in Washington. Congress granted them retransmission-consent rights. For the first time, they could demand compensation from cable operators that wanted to carry their local signals. In their successful campaign for the rights, broadcasters argued that the retrans fees would improve the service to their communities.

The first irony: The law did little to strengthen local broadcasting as it was supposed to. Instead, it strengthened cable TV. How? Instead of squeezing cable operators for retransmission-consent fees and pouring the revenue into their TV stations, multimedia companies led by Fox used their retrans rights to get carriage (and license fees) for new cable networks. This is how FX came to be. Using the same basic formula, ABC and Hearst turned their retrans rights into ESPN2, and NBC founded America's Talking, which morphed into MSNBC.

Most other broadcasters without cable networks came up empty, of course. John Malone, then head of cable giant Tele-Communications Inc. and cable's undisputed leader, made clear in his retrans talks that he would not pay for broadcast signals but would pay license fees for new cable networks. In so doing, he turned broadcasting's Washington victory into cable's marketplace victory. Cable got a bunch of new channels; most broadcasters got squat. Ironic, isn't it?

Now the double-reverse irony: Leading cable operators are now complaining that the Big Media companies are still using retransmission consent in their cable carriage deals. In congressional testimony last week, Cox Communications' Jim Robbins said retrans was created to "protect and benefit" local broadcasting but is being used "to leverage nationwide carriage of new, unproven cable networks." These networks are putting upward pressure on cable rates and sucking up scarce cable bandwidth that could be put to better uses, like HDTV, he said.

I don't know if this too counts as irony, but the cable operators' kvetching comes just as some of those broadcasters without cable networks seem more determined to figure out a way to get retrans bucks out of cable operators. Leading the effort is Emmis's Jeff Smulyan, who sees TV broadcasting's very future tied to getting a second revenue stream, something beyond just advertising. A monthly retrans check fits nicely into his vision.

Smulyan wants legislation that would build retrans fees into the law or an antitrust exemption that would allow all the broadcasters in a market to negotiate en masse with the local cable operator. An operator may be able to stare down one station, his theory goes, but not six when they represent ABC, CBS, NBC, Fox, The WB and UPN—about half the operator's viewership at any given moment.

Two weeks ago, FCC Chairman Michael Powell suggested that raising the 35% TV-station cap was the best way of ensuring the competitive health of broadcasting. Right problem, wrong cure, Smulyan said: "It is gratifying to see that the chairman has recognized that the growth of multichannel providers and their increasing power at the expense of over-the-air television is by far the most important issue for the future of broadcasting." But "the suggestion is like offering the networks a flu shot while exposing every other broadcaster in America to asbestos."

There must be a lesson for someone in all this irony. It's for those cable operators who smugly turned away broadcasters when they asked for cash a decade ago but cut deals for the broadcasters' new cable networks. And who better to deliver this lesson than Bill Bennett? "We should know that too much of anything, even a good thing, may prove to be our undoing," he writes in The Book of Virtue. "We need to set definite boundaries on our appetites."

Jessell may be reached at hjessell@reedbusiness.com

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