ABC says it will join CBS and NBC in trying to get cable systems to pay cash for carrying signals of the eight TV stations the Alphabet Web owns.
ABC’s decision, announced Wednesday, comes in advance of the June 17 deadline for stations to notify cable operators whether they’ll opt for retransmission consent. The alternative is to invoke must-carry, by which stations waive the right to collect cash or other in-kind services from cable operators in exchange for guaranteed carriage.
The decision also sets up a network-cable showdown.
CBS, in announcing that it would ask for retranmission consent, threatened legal action against the top five U.S. cablers (Daily Variety, May 27).
And Wednesday, Time Warner Cable of Stamford, Conn., said it “does not forsee any circumstances under which its systems would pay broadcasters for retransmission consent.”
Network affiliates will decide individually between retrans consent and must-carry.
An ironic side effect of the ABC move is that it could help a new all-sports cable network, ESPN 2, get off the ground.
Sources say that instead of demanding cash from a cable system, ABC may emulate Fox Inc.’s deal with the largest cabler in the country, Tele-Communications Inc. (Daily Variety, May 13). Fox is creating a new basic-cable entertainment network, charging TCI a monthly fee of 25 cents a subscriber and passing along 7 1/2 cents of that to its affiliates.
ABC owns 80% of ESPN, which has run into difficulty trying to get cable systems to take a proposed new sports network under the rubric ESPN 2. ABC has begun talks with TCI and other major MSOs, the sources say, in which the cable operators would pay cash to ABC for ESPN 2 instead of for retrans.
Under this scenario, ABC would then go to its affiliates and offer them a percentage of the cash for the clearance of ESPN 2 on cable systems in those markets. For an affiliate with the highest-rated local newscast, the percentage would be high. Conversely, the percentage would fall off drastically for an ABC station that’s No. 3 in local news.
The reason cablers would rather be perceived as paying cash for a new program service than for retrans is that Federal Communications Commission rules will, in the long run, make it easier for a system to pass programming costs onto its subscribers.
Mike Mallardi, president of ABC’s broadcast group and its point man on retrans, was not available for comment. But in a prepared statement, he said ABC’s “approach at a reasonable compensation formula may also include various options.”
Although ABC didn’t spell out the options, other sources say they could include better dial positions from cable operators for ESPN and for two cable networks in which ABC holds a one-third ownership position, A&E and Lifetime.
Other non-cash options, for both O&Os and affiliates, are upgrading UHF stations to the VHF band, free spots on cable networks to promote the station’s programs, an additional channel that the station could use to time-shift its local newscasts and a joint venture in which the two parties would share program costs and production facilities.
Time Warner Cable claimed it was acting in the best interests of its customers in refusing retrans payments.