Reckoning with retransmission consent

Disruption works in myriad ways. In the classic scenario, an industry gets disrupted when new technology arms consumers with the means to go around traditional gatekeepers to get what they want. But in a heavily regulated industry such as broadcasting, disruption can also occur when technology alters the political calculus of the regulators who define the market in which the industry operates and the relative leverage of market participants.

Something like that may be starting to happen in the market for broadcast retransmission consent.

In nominal terms, the recent retransmission deal reached between CBS and Time Warner Cable after a 32-day blackout was a clear win for the broadcaster, with TWC agreeing to a significant increase in what it pays to carry CBS-owned stations in New York, Los Angeles and Dallas. Yet the network’s heavy-handed tactics in the negotiations, including a nationwide blackout of CBS web content for TWC broadband subscribers, drew renewed — and skeptical — attention to retransmission disputes and the blackouts they often entail from both the Federal Communications Commission and from Congress.

Shortly after the CBS-TWC settlement was announced, Rep. Anna Eshoo (D-CA) introduced a bill that would give the FCC clear statutory authority to end broadcast blackouts by granting pay-TV operators temporary carriage rights while retransmission agreements were being hammered out. And in a rare flourishing of bipartisanship these days, Eshoo’s bill attracted support from Louisiana Republican Steve Scalise.

CBS was only able to wield its heavy-handed tactics, however, because of the enormous leverage Congress itself conferred on broadcasters when it created the current retransmission consent regime in 1992 (for detailed explainers on how retransmission consent came to be — and how in the eyes of many it has since gone awry — see here and here).

That favorable regulatory treatment came about in large measure because broadcasters have for years enjoyed outsize political influence in Washington. Local broadcaster stations and their local news programs have long provided the most effective platform for members of Congress to communicate with their constituents back in their states and districts. Those stations also play host to the political advertising members rely on to get re-elected. So, when broadcasters talk, politicians tend to listen attentively.

At a hearing on the Eshoo bill last week, a spokesman for the National Association of Broadcasters sounded confident that the old magic is still potent enough to beat back any new legislative or regulatory effort to clip broadcasters’ wings.

“I think we have lots of friends in Congress,” NAB’s Dennis Wharton told Politico. “There are a lot of people who understand the importance of broadcasting. If members of Congress want to get their political ads on TV they have to come through local broadcasters because we’re their conduit between them and their constituents.”

Broadcasters are no longer the only conduit, however. As with brand advertising, a lot of political advertising is migrating online these days, reducing the importance of local broadcast stations as an outlet for candidates.

“TV stations across the country have gotten kind of lazy,” said Jim Innocenzi, a founding partner of the political advertising firm Sandler-Innocenzi, said at the TVB Forward conference in New York this week. “I think the local TV stations have to go out there and bump their hump a little more.”

At the same time, social media, big data and the tools of online targeting are giving campaigns the means to communicate directly with voters and constituents and to drive turnout, without the need of amplification from broadcasters.

Those trends will eventually loosen the grip that broadcasters have on members of Congress, if they aren’t already, just as surely as digital platforms have loosened their grip on viewers.

Despite broadcasters’ trumpeting of  the free-market principles they say are at work in retransmission negotiations, the current retransmission consent regime, which grossly favors broadcasters over distributors and viewers, is truly a creature of Congress (and to a lesser extent the FCC). If the broadcasters’ hold on Congress gets disrupted so could their leverage in retransmission negotiations.