Retrans Regime Status Quo Not Seen Changing Anytime Soon, DPI Panelists Say
Any major change to retransmission consent rules isn't likely anytime soon, given FCC unwillingness to get involved and a lack of industry consensus that could motivate Congress, said panelists at a Digital Policy Institute webinar Thursday. The retrans regime "is a hot mess" lacking easy fixes, and could face congressional scrutiny once it gets through net neutrality and revisits the Satellite Television Extension and Localism Act Reauthorization, parts of which expire at the end of 2019, said Phoenix Center President Larry Spiwak.
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Panelists all urged caution against regulatory or statutory interference in the retrans market; those sentiments aren't universal, as American TV Alliance has pushed repeatedly for congressional or FCC action in retrans (for example, see 1706200036 and 1701090039). Panelists said one change that would have notable effect would be eliminating the rule preventing MVPDs from importing distant signals, though Spiwak added the problem is networks can get around that with contracts with broadcasters prohibiting sale of signals outside designated areas. Kagan broadcast media analyst Justin Nielson said any retrans fee regulation could be particularly painful to broadcasters going through station repacking disruptions. Competitive Enterprise Institute Regulatory Counsel Ryan Radia said any statutory or regulatory attempt to drive down retrans fees could end up driving major networks to become cable networks and end their relationships with stations.
Retrans fees are expected to hit $9.4 billion this year, nearly double 2014, say Kagan data. But the steep growth curve is expected to start moderating, with fees projected to total $10.2 billion in 2018 and reach $12.8 billion in 2023, Nielson said. However, he added, Sinclair's planned buy of Tribune or if the FCC removes station ownership caps likely means a step up in those fees. He said broadcasters generally still think retrans charges aren't high enough when compared with the programming fees MVPDs pay cable operators and regional sports networks. Retrans in 2007 was about 2 percent of a station's revenue, today 30 percent and expected to be 35 percent, Kagan says.
The retrans regime problem is the "proverbial social contract" of government regulation fostering localism, with those rules protecting broadcasters from competition, Spiwak said. He said the costs were kept in check in the days when a given market had one MVPD, but growth of distributors gave broadcasters the chance to play one off the others. Spiwak said a policy discussion is needed about fostering localism through regulation versus a free-market approach: ”You can't be half pregnant and split the baby.”