All Extortion is Local, Broadcast Television Edition
October 23, 2009 · By Jonathan McLeod
Anyone else irritated by the fight that broadcast television companies have brought against cable providers? For those who haven’t been introduced to their little campaign, here is the raison d’etre of Local TV Matters:
Local TV Matters is a campaign launched by local Canadian television broadcasters with a focus on the protection and preservation of local television for viewers across Canada. Members include CTV, /A\, Global, CBC, CHEK NEWS, V and NTV, with thousands of supporters across the country. The campaign encourages all Canadians to share their voice and support local television.
Their beef seems pretty straight forward. They send their signal out for free, cable companies pick it up, bundle it with their other offerings and sell it all to us lowly consumers. We pay the cable companies, but none of that money sees its way back to the local broadcast stations. Seems pretty legitimate.
Ahh, if only ’twere so.
The broadcast giants are not looking to merely sell their product to cable providers; they are seeking a government agency to force cable providers to buy their product. This isn’t about a free exchange of goods and services; this isn’t about proper remuneration for a service provided; this is about getting the government to bully your competition into giving you money.
Local TV Matters Media giants like CTV and CBC cry foul over the increase in revenues that cable providers have earned in recent years. Understandably, they want their piece, but they seem unwilling to earn this windfall. Cable providers have begun offering consumers greater selection of channels, more robust packages, time shifting and HD. Broadcasters have offered consumers… umm… Little Mosque on the Prairie?
In response to the bullying, cable providers have set up their own little action committee, Stop the TV Tax. They’re working hard to frame this issue as broadcasters asking the government to make consumers pay more for the service they are currently receiving. Granted, this probably doesn’t equate, exactly, to a tax. The organization should probably be called, Stop the TV Wealth Re-distribution, but their point is valid. Broadcasters claim they are not asking for added fees to be levied against customers; they just want the government to force cable companies to give them money. The fact that increasing the costs of cable service will exert a natural upward pressure on the price of the service seems lost on them. Though, if they had a better grounding in issues regarding costs, revenues and profits, there’d be little need to run to the CRTC for a hand out.
Amusingly, their economic illiteracy is on full display on their web site:
Negotiation for Value (“NFV”) is a term used to describe a free market negotiation between cable and satellite companies and local television stations to establish the appropriate compensation to be paid by the cable or satellite company for the distribution of the local television station’s signal. At present, your cable and satellite provider collects money from you each month for our service, but pays nothing to local television stations for the signals we provide. This is not the same as “fee-for-carriage”, which is a term used to describe a regulated rate to be set by the CRTC for the distribution of local television signals.
I guess I forgot that bringing the weight of the government down on your competition is merely “free market negotiation”. Silly me.
The whole ruse underpinning Local TV Matters is absurd:
You demand local TV, and local choice, and we want to continue to deliver it for you. It’s time to stop cable and satellite companies from charging you more for the local TV you’re already paying for.
It’s nice of broadcasters to have our best interests at heart, though it seems completely lost on them that if we really do “demand local TV”, there’d be no need to run to the regulator. I have no doubt that the existing business model for local broadcast television is no longer viable, however, in most every other industry, companies are forced to change a failing business model lest they cease to exist. Apparently, if you dabble in local broadcast television, you’re immune to such market realities. It certainly takes some gall to seek out this form of corportatism and parade it about in the guise of the free market.
It takes even more gall to force an artificial increase to the costs your competitors must incur and then imply that they are simply being greedy for raising their prices.
Alright, so far it probably sounds like I’m advocating some form of digital free riding – that I think cable providers should just be able to take someone else’s service and re-sell it without passing along any of the revenue. Such an analysis would be correct but for one annoying little fact: the government is forcing cable companies to offer broadcast television. So Rogers and Shaw and Cogecco have no choice but to provide this service. And, let’s not forgot, broadcasters have never passed along any of the increased ad revenue that they receive as a result of their increased audience to the cable providers who are responsible for the increased audience.
There is a pretty easy solution to all this. Don’t let cable providers transmit broadcast television for free. I’ll watch NBC, Fox, CNN, the Discovery Channel, Teletoon, the NFL Network, the History Channel, etc on cable, and then if I feel like watching CBOT, CJOH or ‘A’ Channel, I’ll pull out the ol’ rabbit ears. Seems fair.
Maybe Charles Anthony was right. Maybe the simplest solution is to just dissolve the CRTC.
If I am correct, the cable companies are required by the CRTC to include the local stations in their line up. Those stations get priority positioning on “the dial.”
When I look at local coverage of the stations, it amounts to about one and a half hours per day. Most of it is news coverage. It’s cheaper for broadcast companies to buy programs from independent production companies and then broadcast them on each of their own stations across the country. There is very little content that can be identified as local.
When I think of CTV, it operates most of its Ontario stations from Toronto in Scarborough. It also operates the Ontario A-Channels from Toronto on Queen Street West.
I have my HDTV antenna set up in case I want to cancel my cable subscription. Not only will the broadcast companies lose their local TV tax from me, they will also lose the extra fees for their cable/satellite stations.
I’ve wondered about this too.
After all, in a free market when someone takes your intellectual property and makes money with it, there’s that niggling little detail about royalties. So the owner of said product has the onus on them to take said “profiteer” to civil court and demand reparations.
I’m not a legal expert, but I do recall something about a statute of limitiations or such, that if you allow said practice to continue unabated for more than 6 years the court tells you to get lost.
So I wonder, after letting (or as you pointed out) this arrangement to continue for so long, why haven’t the broadcasters said anything till now?
Could it be that with the cable co’s and satellite co’s carrying their signal, their distribution far exceeds anything they could do with a transmission tower?
Or perhaps is it that in a court of law the judge would tell them to “go fill your boots”.
Gimbol makes a good point in that Broadcasters make their money from advertising and if carried by cable it increases their coverage considerably and presumably they would then charge higher fees than otherwise. What scares me is if they get a further income from all those cable subscribers, directly or indirectly, then will they still go ahead with their threat to shut down various transmitters serving largely rural areas where cable is not available to many of us. We know much of the content is crap but for us broadcast crap is all we can get! I wonder how much of this whole issue is related to costs involved in switching those transmitters to digital?
Just because you want to use rabbit ears does not mean it is ok for cable and satellite companies to take local tv signals and programming for free. You can hear free music on the radio, are you saying cable companies should be able to send you free cds as well??
This is why I happily use no TV services, or watch any TV stations. I think both sides are off the mark, and I do believe the CRTC should be closed.
The thing for me is…
If there is a market for local TV then local TV will survive. If there is value in producing the product, no regulatory agency needs to exist to force the digestion of the product by the consumers and other stakeholders.
If not, then it was not needed, and shouldn’t have been protected. This painful process is called free market. I’m involved in a business in my personal life, and we have competition in the local market, so we have to strive to be attractive to our clients. If tomorrow all our clients left us, then we would fail. But that is fine with me, because I would be free to try something new.
Its not that I want out of my business, just that I understood going in that we need to be relevant to our clients, offer what they want, or go away. The government does not exist to make our customers take our service regardless of what we offer.
So this TV fight is interesting from the outside, and regardless of how it turns out, my life will remain the same. I know it will cost jobs if local TV fails, but then someone is certain to see the new available work force and use their skills in a new project.
As a firm believer in free markets, I am essentially pro-get-government-out-of-communication regulation and funding, with one exception: local news.
Cable carriers competing in Canada should carry a local news segment during the supper time hours. I have no problem with state funding of a truly Canadian strictly news organization. Other than that…
I will vote for the party that will privatize ALL non-news aspects of CBC. If this means splitting the corp in myriad parts, so be it. Perhaps call the new entity the “Canadian Public News Agency.”
Second, Charles is correct; scrap the CRTC. Again, a vote getter in these quarters.
Let the people decide what they want to watch and when by paying for it, as most already do. The prime time statistics indicate Canadians have already chosen mostly American content over Canadian anyway.
No. That is not the only strategy.
The “owner” of imaginary property can form business alliances with other relevent market agents containing the royalty agreements of their choice. If they really value the recuperation of their claimed royalties and if the cost of collecting them was physically affordable, then insurance companies would likely evolve to keep everybody in line.
For example, “If you want our low, low property/auto/ife/health insurance package rates, you have to respect our imaginary property rules and pay royalties as stipulated in this agreement.”
If the public genuinely agreed with all of the unfair IP laws, they would be able to demonstrate their preferences in a markeet. Right now, we all have to take your word and assume that God wants us to subsidize courts to arbitrate all of these petty squabbles in the entertainment industry.
The way I see it, if I go full circle & put up an antenna,I will still get the same product that we don’t really watch but are forced to subscibe to except now it would be free after initial costs and both sides would be SOL.
You state:
“I have no doubt that the existing business model for local broadcast television is no longer viable…”
I’m curious, how do you come to that conclusion? What other model do you propose? I guess local TV is no longer viable because, of course, everyone’s stopped watching it. Oh. Wait.
The difficulties that local broadcasters face are economic. Advertisers pull marketing dollars first when the economy goes downhill. It’s not that their business model is no longer viable.
Alain,
Broadcasters explain that the current business models for broadcast TV and local broadcast TV are no longer viable. It is for this reason that they are seeking this action. I’ve done no research into the matter; I just take them at their word. If they are duping me, they are even more wrong in this situation.
Further, it’s not up to me to offer an alternate business model. I’m not running a TV station. I’m arguing that forcing cable providers to buy their services is improper regulation.
If you want a suggestion regarding regulation, here it is: The CRTC should not force cable providers to carry broadcast TV. Broadcast TV should be able to negotiate a rate at which cable providers purchase the right to transmit their signals.
And, if that means broadcast TV goes under (or cable TV, for that matter), so be it.
Thanks for the comment.