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Is Retransmission Consent Still Needed in 2016: a Look at Regulation, Consumers, Technology and Profit

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Is Retransmission Consent Still Needed in 2016: a Look at Regulation, Consumers, Technology and Profit Is Retransmission Consent Still Needed in 2016: A Look at Regulation, Consumers, Technology and Profit A Thesis Submitted to the Faculty of Drexel University by Chelsea A O’Rourke in partial fulfillment of the requirements for the degree of Master of Science in Television Management August 2016 © Copyright 2016 Chelsea A. O’Rourke. All Rights Reserved. i Acknowledgments I would like to thank all my advisors and colleagues at Drexel University. Mary Cavallaro my advisor, Al Tedesco, Philip Salas thanks for helping to counseling me through this processes. Dave Culver, not only my boss, but my mentor and friend. In addition to so many more people at Drexel. Thanks to my family who never questioned helping in whatever ways they could. Thanks to my husband Mike, daughter Melanie and the baby growing now to add a little time pressure to complete this paper, thank you. To my Mother and Father, without your support encouragement and help, this would not have been possible. Thanks to all of my family both nuclear and married into. The people involved in the broadcast, MVPD and on-line television industry, I’m always impressed with the willingness to chat with anyone who picks up the phone. ii Table of Contents List of Tables ..................................................................................................................... iii List of Figures ..................................................................................................................... v Abstract .............................................................................................................................. vi 1. Introduction .................................................................................................................. 1 1.1. Statement of the Problem ...................................................................................... 4 1.2. Research Questions ............................................................................................... 6 1.3. Definitions ............................................................................................................ 6 1.4. Limitations ............................................................................................................ 7 2. Literature Review......................................................................................................... 8 2.1. Years 1930-1991 ................................................................................................... 8 2.1.1. Regulation is introduced. ............................................................................... 9 2.1.2. Cable television enters the market. .............................................................. 10 2.1.3. Cable viewed in a new light. ........................................................................ 12 2.1.4. Deregulation of cable. .................................................................................. 13 2.1.5. Summary 1930-1991. ................................................................................... 15 2.2. Years 1992-2004 ................................................................................................. 16 2.2.1. The 1992 cable act, a game changer. ........................................................... 16 2.2.2. Satellite home viewer acts from 1994-2010. ............................................... 19 2.2.3. Telecommunications act of 1996. ................................................................ 21 2.2.4. Must-carry and good faith negotiations. ...................................................... 22 2.2.5. Summary 1992-2004. ................................................................................... 24 2.3. Years 2004-2010 ................................................................................................. 25 2.3.1. Cash payments. ............................................................................................ 25 2.3.2. Rising costs. ................................................................................................. 29 iii 2.3.3. Request for FCC involvement. .................................................................... 30 2.3.4. Changes in the economy and technology. .................................................... 31 2.3.5. Blackouts. ..................................................................................................... 32 2.3.6. Summary 2004-2010. ................................................................................... 36 2.4. Years 2011-2015 ................................................................................................. 37 2.4.1. Reverse retransmission consent. .................................................................. 37 2.4.2. The cable act at 20. ...................................................................................... 40 2.4.3. Growing fees. ............................................................................................... 47 2.4.4. Aereo testing the limits. ............................................................................... 50 2.4.5. Satellite television extension and localism act. ............................................ 51 2.4.6. The current state of retransmission consent. ................................................ 53 2.4.7. FCC BLOG posts. ........................................................................................ 55 2.4.8. FCC involvement. ........................................................................................ 55 2.4.9. Summary 2011-2015. ................................................................................... 58 3. Methods...................................................................................................................... 59 3.1. Setting ................................................................................................................. 59 3.2. Participants .......................................................................................................... 60 3.3. Measurement Instruments ................................................................................... 60 4. Results ........................................................................................................................ 62 4.1. Network Non-Duplication .................................................................................. 62 4.2. Syndication Exclusivity ...................................................................................... 63 4.3. Totality of Circumstance .................................................................................... 63 List of References ............................................................................................................. 75 List of Tables Retransmission Deals & Video Blackouts from the Years of 1993 to 2005...................... 28 iv Retransmission Deals & Video Blackouts from the Years of 1993 to 2014...................... 42 Broadcast Television Station Industry Revenue Trends in Millions ................................. 54 Percent of the Population Who Pays for Television ......................................................... 65 Service Provider Earnings in 2010 and 2015 ................................................................... 68 v List of Figures TV Station Reverse Retransmission Fees for the Years of 2012 to 2016 .......................... 49 vi Abstract Is Retransmission Consent still needed in 2016: A look at Regulation, Consumers, Technology and Profit Chelsea O’Rourke Let’s say you are ready to relax and to watch your favorite network television show on your cable box. You sit down, pick up the remote and tune to the appropriate number channel to find CBS. No thought needed. Well that channel is being provided to you as a result of the cable company’s negotiation with CBS known as “Retransmission Consent”. Such negotiations became a requirement of federal regulation implemented in 1992 and have been controversial in the cable and satellite industries ever since. Now, these negotiations sometimes fail resulting in a broadcasting impasse with the consumers sitting down at their televisions and seeing a blackout of certain channels. Is this impasse a profit grab or truly an unnecessary battle caused by regulation and the changing impact of ever-changing technology? With technology changing how the television industry traditionally did business, many changes have taken place over the last twenty-five years. Consumers, technology and profit, are at the heart of the process and the ongoing debate. This research paper evaluates whether the current form of regulation is still needed today; whether modifications should be made or even whether the regulation should be repealed. vii 1 1. Introduction Television professionals can cite chapter and verse about the intricacies of the retransmission consent requirements. However, many consumers have no idea of the history and the impact of the rule on what they watch on television. Retransmission consent officially entered the legislative lexicon in 1992 as an element of the United States Cable Television Consumer Protection and Competition Act. The Act amended the Communications Act of 1934 “to provide increased consumer protection and to promote increased competition in the cable television and related markets” (Cable Television Consumer Protection and Competition Act of 1992, p. 3). It mandated that broadcast television stations, which by law provide their signals at no charge over the air to consumers,
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