CBS, Time Warner Cable Blackout: Congressional

Blackouts should be prohibited during negotiations

This is a guest column from Chad Gutstein, chief operating officer at Ovation, a cable channel devoted to arts and entertainment.

Television is a public good. We forget that sometimes, but it’s true. But you wouldn’t know it based on the spectacle created by CBS and Time Warner Cable duking it out for billions of dollars and blacking out signals to millions of households in New York, Los Angeles, Dallas and other markets across the country.

So, who is to blame for CBS “going dark” on Time Warner Cable? CBS? Time Warner Cable?

The answer is neither. The system is set up to fail.

Back in the 1990s, Congress passed a law requiring cable companies to negotiate with broadcasters for the right to carry their signals. For many years, broadcasters eschewed asking cable companies for money and focused on launching cable networks. Over time, giant media conglomerates were built that combined broadcast stations in the nation’s biggest markets with robust lineups of cable networks.

These conglomerates now have extraordinary leverage. When negotiating with cable companies, they threaten to withhold either popular cable networks or broadcast channels, or both, unless the distributors agree to pay steep rate increases. Programmers also force distributors to carry and over-pay for repetitive networks consumers don’t want or need, often using this “real estate” as a placeholder until the programmer can re-brand the network into something new. Cable companies acquiesce to these rate hikes since they feel they can pass the costs on to customers.

As unfair as that system of price inflation is to consumers, it is now actually getting worse. And for the first time, the number of pay TV households has stopped growing; Nielsen now counts a meaningful number of “zero TV” households.

In response, companies like Time Warner Cable have done two things. First, they have tried to save tiny sums of money by dropping smaller independent networks like my network, Ovation – and in so doing, have further homogenized content on the dial, hurting independent programmers and ensuring that viewers have even less choice as they are asked to pay more money.

Second, Time Warner Cable and others have started drawing a hard line in the sand against the rising costs of broadcast television. This is TV that is supposed to be “free” to all Americans. The current blackout of CBS is just the latest in a long series of such blackouts that trample on the rights of Americans to get the “free TV” we are owed.

So customers’ bills get bigger. Their selection gets smaller. They face inexplicable blackouts. And if all that wasn’t enough, during these fights, viewers have to endure a barrage of perplexing political-style ads asking them to take sides between the rich and the wealthy.

CBS is right to point out that Time Warner Cable has been one of the most combative distributors, throwing off networks like Ovation, CBS and many others. But the bigger issue is the system and the antiquated laws that govern it. Congress needs to reform the rules of the game so that consumers’ interests come first.

A reform agenda would prohibit the blackout of signals to viewers during negotiations, provide meaningful protections for independent programmers, and restrict wholesale bundling practices so that media conglomerates can’t use their leverage to drive up rates that ultimately get passed on to consumers. Above all, it would empower the FCC to more aggressively protect the public interest.

Whether Time Warner Cable or CBS ultimately win, your cable bill will still go up and Ovation, America’s only arts network, will still be blacked out to Time Warner Cable subscribers. In which case, the American people will be saying “heads you win, tails I lose.”

Tonight, millions of Time Warner Cable households will see a blank screen when they turn to their local CBS station. It is a fitting symbol of a system that is broken. It’s time for a fix.

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