Retransmission Consent: Yep, Still Broken

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Our country's absolutely ridiculous "retransmission consent" system continues to distort the video marketplace. This is the set of arcane rules that give local broadcasters (and not copyright holders) the right to decide whether cable systems (and IPTV and satellite providers) can carry their programming. A system that should be about connecting creators to viewers instead empowers middlemen who collect money from both sides. It's not that distributors and other kinds of middlemen have no place--far from it. But they should add value, and be compensated accordingly. Instead, certain intermediaries find themselves collecting ever-more money even as their cultural relevance is decreasing--as Ross Lieberman at the American Cable Association (which represents small and rural providers) pointed out this morning, the fees that cable operators (and in turn, viewers) pay in retransmission feeds keep rising even as broadcasters suffer record-low ratings. But instead of just banging the drum about rising prices and periodic blackouts, in this post I'll call attention to two recent events that highlight how things have gone wrong and how the marketplace has been distorted.

First, remember ivi? It's a company that argues that it's a cable company--just one that works over the Internet, and could be (theoretically) accessible from anywhere and not just in some sliced-off geographic area. ivi tried to get off the ground but the broadcasters sued them into oblivion. It would be great if people had more subscription video choices--and ones that offered the traditional array of broadcast and cable programming (including live sports) and not just the "long tail" and on-demand approach that companies like Netflix have taken. But under the law, only "cable systems" get to qualify for the necessary copyright licenses that allow them to carry broadcast programming. We argued that ivi met the relevant definitions, but we lost, and the Supreme Court recently declined to hear ivi's case. (Oh, by the way, notice how in that blog post we said that ivi was "a sign of things to come"? cough Aereo cough) It makes no sense that the law only allows some kinds of companies that have just the right kind of wires dug under streets and hung on phone poles to offer video services to the public--what exactly does any of that stuff have to do with anything? But this is the world we're stuck in, until Congress changes the law to promote competition instead of restricting it. (Of course, another appeals court could still rule the other way--the Supreme Court's decision not to hear an appeal of a decision from the Second Circuit means that the Second Circuit's decision is still valid in the Second Circuit but has no legal significance anywhere else in the country. The Supreme Court did not, for instance, say the Second Circuit was right. The whole point is that it didn't say anything.)

Second, Sinclair Broadcasting isn't a company that people outside of the media industry and media reform movements tend to know a lot about. But it's the company that owns more "local" TV stations than anyone else, and it's recently announced plans to buy 18 more. Sinclair is emblematic of how the retransmission consent system doesn't actually work as it's supposed to. Notice I used the word "local" earlier. One of the basic premises of our media system--the reason we still have TV stations using the airwaves even though most people watch TV through other means, the reason we allow TV stations to decide who gets to carry the programming they retransmit, even though that programming is generally decidedly not local--is to promote "localism." The theory runs, "let's give local stations extra rights in the law because they'll do good local things with them." This means--this should mean--not just that TV stations provide news and information that is relevant to the communities they operate in, that caters to local taste, and helps them stay up with local affairs. It should also mean that the local community in question has a stake in the station and a say in how it's run. It shouldn't just be a local franchise of some faraway company. (I'm not talking about network affiliation here--Sinclair owns NBC, Fox, ABC, CBS, and CW affiliates, along with and other stations. The network/affiliate relationship is an old and weird one, but different than what's at issue here.) Big blocks of stations like Sinclair can make things worse for viewers in a lot of ways. "Regional" content will come to substitute for local content, and the schedules of different stations will tend toward uniformity. Local business that want to advertise will find themselves dealing with faraway media executives, not other local businesspeople. And cable systems that want to carry broadcasters find themselves negotiating with companies that can offer "take it or leave it" terms--and do so in concert with a sister stations in nearby markets. (Indeed, sometimes stations jointly negotiate over retransmission consent even when they're not commonly-owned.)

Our media regulations are supposed to promote a number of values, very few of which they fulfill. Many local TV stations are as local as a Mongolian Starbucks, and rules that are supposed to facilitate competition arbitrarily exclude competitors. We need structural change to put the needs of viewers ahead of the needs of empowered intermediaries, not just to lower prices or improve things for viewers as consumers, but to promote the very ideals that the current system was supposed to promote in the first place.

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