Sports Law Blog
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Thursday, December 31, 2009
 
The Fox-Cable Wars -- Sports Fans' Woes


In addition to sports law, I teach and write about communications law issues. With a new year approaching, a nasty access war between Fox and Time-Warner Cable, one of the nation's largest cable operators is simmering, which may wreck havoc on college football fans (and devotees of other Fox programs) once the new year begins.

Basically, it comes to a game of economic chicken. The 1992 Cable Act (and subsequent FCC regulations) gives over-the-air broadcasters a choice of carriage options: the first is known as "must-carry," meaning that in a given market served by a cable operator the over the air station must be carried on that cable system, but does not receive any compensation. However, a broadcaster may opt for an alternative, known as "retransmission consent," which involves a negotiated payment to that station for carriage on the cable system. Here, if the station elects this option, the cable operator may decline the request, and that station is off the cable system. If this occurs (and it has on rare occasions over the last 15 years), cable subscribers will be greatly inconvenienced, since they have to get an additional equipment (such as an antenna or converter box) to access that station.

The greatly majority of stations have opted for must-carry, but a few stations, sensing their economic power, have sought retransmission consent. Most of those disputes have been settled a few days after the station was blacked out. But this particular dispute may have far greater ramifications.

With dwindling audiences for network and over the air television in general, these stations are seeking greater revenue streams than just the advertising model of the past. Fox is seeking $1.00 per cable customer from Time-Warner in cities such as New York and Los Angeles. If not, Fox is prepared to let some major stations opt-out -- leaving sports fans without some marquis events, such as the Fiesta, Sugar and Orange Bowls in the next few days. If Time-Warner agrees, this would set a major precedent because other cash-strapped networks and stations could very well want the same thing. That could help the networks raise billions of dollars, but also result in higher fees for cable subscribers.

If indeed Fox makes good on its threat, look for Congress to hold hearings. Look for the sports entities (e.g. Major League Baseball) to be concerned and possibly recalculate rights fees if Fox's ratings drop. Look for some subscribers to ditch their cable operators for satellite (or for nothing at all). Something that has not been addressed involved the constitutionality of this schema. I think that if this problem festers, look for a legal challenge to the must-carry rules. In the 1990s, the Supreme Court upheld their constitutionality by narrow 5-4 votes, using an intermediate scrutiny standard, (see Turner Broadcasting v. FCC I and II), and a very elastic one at that. The majority opinions gave great deference to the FCC's reasons, but since then the composition of the court has changed to, arguable, a more sympathetic First Amendment court and the numbers of television options (including more cable channels, the advent of digital broadcasting and Internet streaming options) that may render this regulatory framework obsolete. If that happens, then the gloves can really come off. Stay tuned.





10 Comments:

As a member of the Gator Nation, and an unfortunate subscriber of Brighthouse networks (time-warner) cable, Im a bit concerned. But there is always the Wing house right?

The compensation sought by Fox is no chump change, but since they carry some of the top shows on tv, shouldn't they be able to reap the profit of their success? With advertising income on the decline, I would expect that this is going to happen more often.

On a side note, I remember when SunSports secured the rights to Tampa Bay Lightning Hockey games, Brighthouse (Time-warner) refused to compensate Sunsports for the additional premium programming... and those of us on brighthouse were left out the TB Hockey loop for a period of 2 years...

Blogger Jimmy H -- 12/31/2009 12:04 PM  


Great work making sense of this complicated situation. As a DirecTV subscriber in a non-Time Warner area I am unaffected directly, but I nonetheless am watching this situation with a great deal of interest.

Anonymous Lou P. -- 1/01/2010 7:45 PM  


http://www.foxnews.com/story/0,2933,581744,00.html

Looks like its over for now.

Anonymous Anonymous -- 1/01/2010 10:53 PM  


it's really not good!
It's ok if they are dealing with themselves but man we fans are getting ridicules experiences due to them!!

-adwait
Sports blog

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