Contrary to advertisements on Billings Fox affiliate KHMT, TCT has reached agreements with the network affiliate and is confident it will reach agreements with all affiliates in Billings for the next three years.
TCT Chief Technology Officer Richard Wardell said, “It is very likely that we will reach an agreement and have reached agreements with two of them already (KSVI and KHMT). However, that doesn’t mean that we will like the terms. The rates will be much higher than we think they will be worth, but too many of TCT’s customers don’t want to do without those networks.”
Three years ago negotiations began in September when the KULR, KTVQ, KSVI and KHMT declared, “retransmission” rather than “must carry” for their providers including TCT.
Wardell said the same networks elected retransmission consent this cycle, as well as KCWY in Casper, which is provided in Ten Sleep.
He explained, “Must carry states that the provider (TCT) must carry the signal. The network delivers the signal to the head end and there is no charge to the provider because TCT is required to carry the signal for the network. In a retransmission consent election everything is negotiated as to the responsibility of each party: where the signal is received, which package it is to be included in and the price per subscriber for the service. However, TCT could opt not to carry the service.”
This year two of the networks began negotiations in early December with TCT. He said last week that two of the networks have not sent any proposals.
“Much of the strategy used in some of these agreements is to use the calendar as leverage to force the negotiations,” Wardell explained. “This time around, within a week one of the networks sent a revised agreement after the first call and then gave us two business days to make a decision and then started running spots on the networks stating that TCT was not renewing. These tactics as well as blackouts in some cases are used to force the hand of the providers like TCT.
“The television networks are in a tailspin and they are taking us to a place that is not going to be able to sustain itself. Three years ago we took an incredible price increase with the locals. They are again asking to more than double our cost between 2014 and 2015. In the negotiations with them I used some basic numbers that if we took their rate of increase across the board a $50 video package would now be $118 and at the end of the three-year deal it would cost our customers $144. That is not in any way, shape or form viable for TCT’s customers. We have just gotten through the negotiations with Viacom last year with huge cost increases. TCT pulled those networks for a while trying to get better rates but didn’t gain any ground. The Disney/ESPN deal was also done a few months ago and again big increases. The Discovery deal is now in the works and is expiring at the end of this year and still no exact numbers, but it is going to be ugly.”
He added, “The industry model is broken and is going to crash in the not too distant future. Customers need to know that TCT isn’t the bad guy when it comes to TV. We cut checks monthly to the networks and spend well over a million dollars a year. TCT doesn’t put all the money from our subscribers in our pockets but cuts a check on a monthly basis for the content that TCT customers ‘consume.’ And it is based on the number of subscribers and is today almost $1.5 million a year. This number keeps rising as the incremental increases kick in year on year.”
As for other negotiations, Wardell said there are a few providers who control many channels. If a provider like TCT selects a channel for an agreement they cannot eliminate that channel in future agreements. There are 14 channels offered by Disney/ESPN, nine from A&E, six from Scripps, 24 from Viacom, 15 from NBC Universal, seven from Discovery and 12 from Fox.
As for alternatives to the Billings channels for the four major networks, Wardell said, “The alternatives for the ABC, CBS, NBC and FOX is to not carry them. The laws are outdated when it comes to the local channels. TCT isn’t allowed to carry a Salt Lake or Denver station if the network from the local designated market area (DMA) is not already on the system or the Montana station gives us permission to carry another one, which will never happen.”
He said all of TCT’s territory is located in the Billings DMA with the exception of Ten Sleep, which is in the Casper DMA.
“When it comes to the other cable networks sometimes there are channels with similar content that can be used to replace one that is removed. In the world of Dish network they recently removed some of the Turner networks and added the Blaze in place of HLN at least temporarily while in negotiations with Turner. Currently Dish is replacing Fox News with The Blaze as Dish has pulled Fox News and Fox Business while in contract negotiations,” Wardell explained.
“There was a recent lawsuit that had the potential to radically change the industry but was shot down by the Supreme Court,” Wardell said. “Technology from Aereo would have changed the landscape for at least the local broadcasts. Aereo used a technology solution with an antenna farm that allowed them to take the off air signal from local broadcasts and package it just for the consumer via the Internet. They then rented the consumer the equipment for that service. It even had the capability of DVR services on the local channel.”
Wardell said the Supreme Court ruled that service is free with an antenna, but it isn’t free with an antenna “if you add anything to it.”
As for the impact on TCT customers, Wardell said the increase is unknown until all negotiations are complete.
“Those figures are being calculated but won’t be finalized until the agreements are reached,” he said. “Besides those networks that are up for renewal this year all of the existing contracts have incremental increases year on year. The most recent agreement negotiations have substantially changed the percentage of increase with the new contracts and most contracts outside of the retransmission consent agreements are for either five or seven years and so the percentage of increase is known. All of the new ones are a moving target until finalized. Sometimes the rates may not take a huge increase, but the networks will require TCT to launch new channels, which also have a price on them so the aggregate price still has a large increase.”
By Karla Pomeroy, Editor, Basin Republican Rustler