Retransmission tussle could benefit those with rabbit ears

As the tussle over retransmission consent fees continues to play out between broadcasters and the cable biz, one factor that’s been largely overlooked is the easy availability of free over-the-air TV via rooftop or indoor rabbit-ear antennas.

When Time Warner Cable and Fox engaged in their public ad blitz and brinksmanship in December, with the cable guys threatening to throw the broadcast bums off the air if they didn’t stop demanding excessive fees for the right to retransmit the Fox package of services, no one bothered to inform consumers that much of the Fox programming — including the ever-popular “American Idol” — is available for free to almost anyone who purchases a cheap indoor antenna (prices range from $4.99 and up at Radio Shack).

That’s the only way nearly 10% of U.S. households receive “Idol” and countless other broadcast shows, according to Nielsen. The other 90% get them via cable or satellite.

But two things are happening that could help “free” over-the-air TV stage a comeback.

First, the cost of cable continues to rise, spurred in part — say cable operators — by the very retransmission fees that broadcasters are now charging cable systems to carry their signals.

“Every time our contracts with TV program providers come up for renewal… we face price increases,” Time Warner Cable declared on its RollOverOrGetTough.com website mounted to spin its side of the story during the year-end skirmish with Fox. “Sometimes we can avoid passing them on to you. Sometimes we can’t.”

The second factor working in favor of over-the-air TV is the government-mandated transition to digital broadcasting last June. The technology has allowed local broadcasters to offer viewers stronger, clearer signals and multiple new services that could eventually challenge cable’s channel cornucopia.

“The phenomenon of cutting the cable cord will only grow,” says National Assn. of Broadcasters exec veep Dennis Wharton. “Add to that the lingering recession and there’s opportunity for a renaissance in over-the-air broadcasting.”

Seven months after the digital switchover, many large-to-mid-market broadcasters have adopted the strategy of using a large portion of their spectrum to beam their main channel in high definition and the balance to carry two or three standard-definition “multicast” subchannels offering such fare as 24-hour weather, lifestyle or syndicated programming.

Other broadcasters have opted to slice their digital spectrum into eight — or sometimes even more — standard-def subchannels. For example, Los Angeles station KSCI, which brands itself as LA 18, broadcasts programming to the area’s burgeoning Asian population on subchannels 18.1 through 18.8.

“We decided the best use of the spectrum was to not broadcast in HD but to provide a suite of Asian-language channels,” says Peter Mathes, a former Chris-Craft Television exec who is now CEO of privately held parent company Asian Media Group. LA 18 programs and sells time on two of the channels and leases out the other six for a flat fee while keeping some of their advertising inventory.

“The digital spectrum is what allowed us to offer all the channels,” says Mathes. “Anecdotally we hear stories that at least within the Asian communities many people have left cable and satellite because they’ve got such an abundance of over-the-air channels right now.”

“There’s a lot of stuff available over the air,” concurs Paul Karpowicz, prexy of Meredith Local Media Group, which owns 12 stations in mid-sized markets including Atlanta, Kansas City, Mo., and Las Vegas. “As more viewers look at their cable bills they’ll say, ‘You know, what if I get a good antenna and try that for a while?’ “

But others question whether the abandonment of cable for over-the-air reception will ever amount to more than a trickle — even with cable fees continuing to rise.

“I don’t ever see that becoming so widespread that there’s a dramatic change in the economics of the industry,” says one exec from a Big Four network. “Just because it’s available to consumers, it doesn’t mean they’ll do it. They watch broadcast more than any of the cable channels, but they still want to be able to get ESPN, the Fox regional sports networks, and the general-entertainment (cable) channels that are doing original programming.”

“Most people are willing to pay for a subscription-based service, in part because they

like choice beyond local broadcast stations,” says Barry Faber, exec veep and general counsel at Sinclair Broadcast Group, which owns nearly 60 TV stations and is known for its aggressive stance in retrans negotiations with cablers. “But if it doesn’t include the broadcast stations, it’s not a service they want to buy.”

While large-scale abandonment of wired TV for over-the-air reception may be cable’s worst-case scenario, it would be no picnic for broadcasters, either. After all, they’re only starting to get used to the dual revenue stream of advertisers buying time and cablers paying retrans coin. Market research firm SNL Kagan predicts that such feees will grow substantially in the next few years to approach $2 billion by 2013.

Maybe that’s why no one ever seems to bring up the over-the-air option whenever there’s a public debate over the high cost of cable.

“When you look at the percentage of people who get their TV service from cable, clearly that’s where we have to be,” says Meredith’s Karpowicz. “We absolutely want to be carried on cable. All we’re asking for in our retrans discussions is a fair exchange for the value we bring to the cable system.”

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