Cable TV and Broadcasters Haggle Over Program Pay
PITTSBURGH — AMERICAN broadcasters and cable television companies are engaged in a war of words over money. Broadcasters want to be paid for letting cable stations air their shows. The cable companies, at least the big ones, refuse to pay directly.
The haggling and posturing is increasing as the Oct. 6 deadline approaches. But quietly and without much fanfare, the two branches of the TV industry are creating a new market that will answer an important question. The industry is on the verge of learning the value of all those game shows, soap operas, and prime-time movies that Americans for years have watched for free.
"We're in a stage where different industries are flexing their muscles and the products are finding their prices," says Sharon Strover, a professor of radio, television, and film at the University of Texas at Austin. "I think this was inevitable."
In the golden years, broadcast television did not have to worry about value directly. Advertisers were happy to foot the bill as long as enough viewers watched. Now, advertisers and viewers have their pick of multiple channels. Broadcasters are losing a share of the audience.
Congress tried to help them last year when it passed the cable act. The act allows broadcasters to demand payment from the cable stations that carry their signals. If the two sides cannot reach agreement by Oct. 6, the act allows broadcast stations to pull their programming from the cable lineup.
Neither side wants to see that happen. Both would probably lose viewers. Since no one knows which side would lose the most, the haggling continues.
"We don't have those answers," says Michael Wirth, chairman of the mass communications and journalism department at the University of Denver. "The marketplace will definitely find out what that price [for broadcast programs] will be. [But] it could be a school of hard knocks."
At the moment, the biggest battle involves CBS and the nation's largest cable companies. Smaller cable companies have agreed to pay cash to carry CBS stations. But the broadcaster has gotten nowhere with major cable companies. Tele-Communications Inc. (TCI), the nation's largest cable provider with 10.4 million subscribers, has vowed not to pay cash for retransmission of any broadcaster's signal. So have Time Warner Cable and Continental Cablevision.
Both sides have a point.
"We're not going to pay for the same product that they give away for free in the marketplace," says Bob Thomson, a senior vice president with TCI. Another problem: The cable act does not allow cable operators to pass onto consumers any price hikes related to retransmission of broadcast signals, Professor Wirth says.
But broadcasters counter that cable systems pay for the other channels that they put on the air, so why not broadcast TV?
"No one has denied that these stations provide significant value to the cable lineup," says Lynn McReynolds, spokeswoman for the National Association of Broadcasters in Washington, D.C.
The cable companies' united stand against cash payments has caught the eye of Sen. Daniel Inouye (D) of Hawaii. He recently wrote large cable companies saying he might investigate their "parallel strategies."
Despite the charges and harsh rhetoric, many cable companies and broadcasters are quietly coming to terms.
Here in Pittsburgh, for example, two of the three network affiliates are pushing forward with deals. NBC-affiliate WPXI has signed an innovative deal with TCI to start a new 24-hour regional news-talk and information channel. TCI, a minority partner in the venture, will air the channel and split the ad revenues with WPXI.
The local deal resembles NBC network's agreement with Time Warner to air an all-talk cable channel called "America's Talking."
Pittsburgh's ABC affiliate, WTAE, has reached agreements with about half of the cable companies that operate in the area.
"We're very encouraged by the fact that these deals are going together," says Joe Rovitto, assistant to the station's general manager.
WTAE is letting its parent company, the Hearst Corporation, negotiate the deal. Hearst and Capital Cities/ABC have reached their own arrangement with Time Warner. The cable system will pay subscriber fees to air the companies' new sports channel, ESPN2 - a spinoff of their successful ESPN channel.
Pittsburgh's largest TV station, CBS-affiliate KDKA, has not signed any deals yet. "The nicest form [of payment] is cash," says Dane Topich, the station's public affairs manager. But "if broadcast and cable decide to sell joint advertising, that's cash" too.
Mr. Topich does not appear too worried about being cut off from cable programming. KDKA dominates the market and has the rights to air the city's professional baseball and hockey teams. "It's a gutsy game that both people can play," he says of the negotiations.