Fox affiliates seek SHVERA relief


It’s not that Fox Television affiliates have any problem with the basic outcome of SHVERA, which was to provide effective competition between cable operators and satcasters, and to benefit consumers with access to local broadcast television stations over satellite. It is an unintended outcome of the program – the transfer of pricing power to the owners of the programming. That’s seen as causing the migration of key material from broadcast to cable, a trend which could eventually bankrupt free over-the-air TV and eliminate the local service that comes with it.

The Fox Television Affiliates Association laid out its case in a recent letter to House Subcommittee on Communications, Technology, and the Internet Chairman Rich Boucher (D-VA), written by its Chairman John B. Tupper.

Here’s the basic argument: Competition between cable and satellite has allowed the programmers to put a premium on must-have channels, with ESPN at the top of the heap. They are also able to tie in other program services that the MVPDs may not want in a take-it-or-leave-it bundle. The MVPDs have no choice but to accept the offer or lose viewers to their competitor, and simply pass the costs on to subscribers. That is a large part of the reason cable rates are skyrocketing so much faster than other products and services. Tupper says cable typically gets the blame, but it actually should rest with the programmers.

But in the ESPN example, only 25% of MVPD subscribers watch as much as 15 minutes of it a week. They still may pay $60 a year for it regardless. Tying the cable and broadcast universe to cable rates, Tupper says the average cost per ratings point consumers pay for basic cable material is $5.31, compared to an almost invisible $0.29 for broadcast stations.

The programmers turn around and use the profits from their deals with MVPDs to outbid broadcast networks for key programming. One of the biggest examples is the migration of Monday Night Football to cable, but it goes much farther than that, including vast swaths of sports programming as well as newly created and syndicated programming.

Ranking winners and losers under the both the intended and non-intended SHVERA results, Tupper says obviously cable programmers come out on top. Satellite used broadcast carriage to triple its subscribership. Cable suffers from new competition from satellite but answered it by moving into provision of telephone and internet service. Broadcasters are undercompensated for the value they provide to MVPDs and are losing critical programming, and many are already verging on or actually experiencing bankruptcy, and the lack of solvency diminishes its ability to provide local news and information, and critical service during emergencies. Consumers are the biggest losers: if they subscribe to an MVPD, they watch their monthly bill rise with numbing consistency, and if they watch over-the-air, they are losing access to programming lost to cable.

Tupper’s solution is simple: “A prohibition on block booking and discriminatory pricing by cable programmers will solve the problem. This will not be disruptive in any way to consumers. MVPDs will finally be freed from the monopoly practices of programmers. The Acts have been unfair to the two losing stakeholders referenced above. A slight rebalancing will bring fairness to all and preserve our democracy. Whether or not it is too late to save the print media, it is not too late to preserve free, over-the-air broadcast television.”

RBR/TVBR observation: This is a particularly thorny problem, because many of the big entertainment conglomerates have deep roots in both the broadcast and cable side of the equation. But it’s undeniable that programming is moving away from purely local outlets and also that consumer prices for subscription TV are rising much faster than CPI. This matter deserves a serious look-see from both Congress and the FCC.