Carriage Fees: The U.S. Version

IT SHOULDN'T SURPRISE you to know that nothing in Canadian Television happens in a vacuum.  And so it is with the Cable TV - Broadcaster fight over "carriage fees." Or as KonRadvF (which I am hereby decreeing the Chairman of the CRTC's new "internet" spelling. Why? For the lulz, of course) would like to frame it:  "value for signal."


The Value for Signal proposition has been proceeding rather more quietly in the United States up til now.  CBS successfully negotiated a fee for programs with cable operators a few months back.  


Now all that's changing.  In a number of high profile markets (including the one where I'm currently parked, Orlando) carriage agreements expire December 31st.


And FOX is leading a push that might seem very familiar to Canadian viewers of the "Local TV Matters" "Stop the TV Tax" ads of the last several months.


The New York Times has a pretty good article on the lowdown. The upshot is that FOX is pushing for way more than anybody's ever gone for before -- up to a dollar a subscriber.  And that's resulted in a mini-version of the ad campaign Canadians have been seeing for months, catered for every market.


You can see some of the pics I took of the FOX-sponsored ads as they appear in recent editions of the Orlando Sentinel.  Elsewhere in the Times article they have the same ad, purposed for Time Warner Cable.


There are some key intriguing differences in the American-style fight that you have to understand going in, though, too:


1) Nothing's mandatory.   One of the points that the Canadian Cable and Satellite providers raised at the recent hearings that was actually quite valid was that they are required by law to carry the Canadian networks.  So they rightly turned about and said, "you can't make us carry them, and expect us to pay for them."  That would mean cable had no lever to negotiate. The Canadian networks could literally charge whatever they want.  In the U.S. system, cable is not required to carry anybody.  Even though fights like the current one have happened before (though never for so much money - a buck is a big jump) they usually get resolved because there IS pressure to both sides to come to a deal.  Customers want the channel because there's lots of programs on it that they like; cable wants to give the customers what they want so they can retain subscribers and keep their service valuable.

2) Affiliates -- The U.S. networks are a mix of what are called "Owned & Operated" stations and Affiliates.  "O&O's" are exactly what they sound like.  ABC owns several stations in major markets, CBS the same, etc.  Sometimes it's easy to tell, because of the station call letters:  WABC, or KNBC, for instance.  Besides the O&O's though, there is a large network of stations owned by smaller broadcast groups -- who pay to "affiliate" with the network for access to their programming, promotions, etc.  On these stations there are "network hours" where the advertising revenue is split between the nets and the local stations, and local hours, where all the ad money (and the responsibility to fill the airtime) goes to the local stations.  (Ie: local news hours, game shows or syndicated off-network sitcoms, etc.)


As I understand it, Cable started giving money to affiliates to carry their feeds years ago.  And now one of the fronts in the fight is the originating networks asking for some of that money back, since it's their marquee programming that makes those local stations valuable to carry.


In Canada, the nature of the "affiliate" culture went by the wayside a few years ago.  Now Global and CTV, and (mostly) CBC depend on stations that they own outright.  It's a different culture. (Very different, when you consider CTV, who once upon a time had a completely backward structure --  powerful affiliates with an anemic central network)


3) Tone of the ads -- if you're somebody into reading Tea Leaves, this is the most interesting part of the fight. First, in the FOX corner -- look at what they're threatening to pull.  Those are some programs. There really *is* a value to that signal.  


You now start to see the hole that the Canadian nets dug themselves into, after all those years of consolidation, cutting local shows and putting their entire focus on centralized schedules that relied almost completely on American shows.  It's not that framing the debate as "Save Local TV" was the best move. It's that it might have been the ONLY move.


But the difference that really matters is on the Cable side.  Last night I saw a Bright House ad responding to the FOX ads.  You can view the same spot on their website here.  It was calm, reassuring, explained that this was business, and it happened all the time and that nobody's going to lose their signal come New Year's day and they'll reach some sort of agreement just as they always do.   The print ad tries to make the same point, in much the same way.


Notice -- no hysteria, or histrionics, or "Stop the TV tax!" stuff.  (Although Time Warner's got a bit more heft in their RollOverorGetTough.com site...)  They know the value of their product -- and they also know that their business model's way more secure than the Networks' though for the next little while the fortunes are both are inextricably linked. 


Of course, this being the United States, somebody's also figured out a way to sue.


FOX is playing high stakes poker here, and going for a big grab, but the reaction isn't anywhere near as OTT.  I don't know what could possibly explain the cultural difference, except maybe that what we saw in Canada was two industries that are used to going to the CRTC and getting whatever they wanted, in terms of "goodies bestowed" from on high.  Maybe this is one of those cases where you don't pull out the grenade because you know at some point you're gonna have to shake hands and solve it yourselves. And it's harder to shake somebody's hand when you've just blown it off.


Or maybe I'm wrong, neither side will blink, Florida viewers won't get to see the Sugar Bowl, and the Panhandle will be burning by Friday.


Stay tuned -- if you can!


UPDATE:  lookieloo. they have a deal.  See?  It's possible. Think KonRadvF is on the phone yet?