Carriage Spat Rages in Spokane

With local Fox affiliate dark on cable operator’s system, new satellite subs soar
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The ongoing clash over retransmission consent between Time Warner Cable and KAYU Spokane, Wash., may cost the cable operator upwards of $3 million in lost subscription fees. According to executives at the Fox affiliate, viewers in the market have been dropping Time Warner Cable since December, when KAYU yanked its signal over the operator’s refusal to cough up enough cash to carry it. Time Warner Cable vehemently disputes KAYU’s assessment, but a spike in new satellite-TV activations in the market suggests that the churn has been significant.

One of a small group of Fox and MyNetworkTV stations owned by Northwest Broadcasting, KAYU went dark on Time Warner Cable’s system in the Spokane market Dec. 14. Nielsen’s No. 77 DMA covers parts of Idaho, Washington and Montana. It brought in $53.1 million in 2006, according to BIA Financial; KAYU claimed $9.2 million.

“We’ve yet to work out a deal that works for both of us,” says Northwest President Brian Brady, the former chairman of the Fox affiliates board. “Viewers continue to be pawns in this game.”

According to Brady’s calculations, 6,000-7,000 local Time Warner Cable subscribers have scrapped their service, which he estimates is a $3 million-plus hit for the operator. He reached the figure by tallying the market’s increase in satellite subscribers, figuring each one is worth $50 a month, and multiplying that out over a year. “We weren’t asking for anything close to that,” says Brady.

A Time Warner Cable spokesperson disputed Brady’s reasoning: “We’ve lost some subscribers, but that number is a fabrication.”

But data from satellite-TV carriers in Spokane and other markets embroiled in similar disputes suggests there may have been a dramatic exodus from cable.

“It is clear these disputes do affect consumers’ behavior, especially when they’re given a little help to make the jump [from cable],” says a spokesperson for DirecTV, which declined to share numbers for Spokane but noted a 16% increase in various markets stemming from the recent retrans face-off between Sinclair Broadcast Group and Mediacom. (The two reached a multi-year, cash-for-carriage deal in February.)

EchoStar, meanwhile, saw a 90% activation increase for its Dish Network in the Spokane DMA in the past two months, compared with the same period last year. And KAYU executives say they have worked with EchoStar and DirecTV to steer disgruntled cable customers toward the satellite providers’ product.

The skirmish is one of many recent rows between broadcasters and cable companies over retransmission consent. CBS Corp. got cash from nine unnamed operators in February, just before Sinclair and Mediacom settled. And Nexstar emerged victorious after pulling its stations’ signal from Cox systems.

And with several significant carriage agreements up in the next year or two—industry insiders say to watch Gray, Clear Channel and Raycom, among others—more bloody retrans battles are sure to follow. “Broadcasters always felt they had leverage but never took advantage of it,” says Bruce Northcott, principal at media-research firm Crawford Johnston & Northcott. “Now everybody feels like they’ll get their pound of flesh.”

A RETRANS DAVID V. GOLIATH

To be sure, Brady and KAYU General Manager Jon Rand, who likens the station’s plight to David’s vs. Goliath, relish their role as feisty underdogs. The station’s answering service invites viewers to learn more about “Time Warner Cable’s removal of KAYU” from its channel offerings, then breaks down the finer points of retransmission-consent law, accusing Time Warner of charging subscribers to watch a free signal. “By law, cable companies must have permission to offer local TV stations,” the recording states.

And despite the lack of carriage on Time Warner Cable (which shows film network TCM in KAYU’s stead), Rand and Brady say ratings are up from a year ago. (Viewers tune in via satellite, over-the-air or even at viewing parties that Time Warner Cable has been hosting for major TV events on Fox.)

“We had a terrific ratings book in February,” says Rand. “If you’re offering compelling programming and people want to watch you, we feel, by and large, they’ll find a way to do it.”

While both sides stand by their rhetoric, they are at least communicating. And some expect KAYU to return to Time Warner Cable in the coming months (likely before pre-season football begins for the market’s beloved Seahawks, says one party close to the negotiations).

But Brady warns that Time Warner and its ilk have not heard the last from broadcasters concerning retrans cash. “Every broadcast group in the country is fighting the fight,” he says. “As these agreements come up, I think you’re going to see a dramatic shift in the way these things get settled.”

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