FCC Intervention Downplayed In Sinclair-Dish Network Blackout; Are Retransmission Fees Reaching A Tipping Point?

Following a historic blackout of 129 TV stations this week, Sinclair Broadcast Group Inc. significantly downplayed the role of government intervention to resolve the situation, but its tough-talking rhetoric may not do much to curb growing scrutiny of retransmission fees and their role in channel blackouts.

The fight between Sinclair and Dish Network Corp. got the attention of the chairman of the Federal Communications Commission, Tom Wheeler, who on Wednesday directed the agency’s Media Bureau to convene an emergency meeting after Sinclair-owned stations went dark in almost 80 U.S. markets and Dish requested injunctive relief.

Following the meeting, Sinclair and Dish reached a temporary extension to restore the signals, and Wheeler issued a statement saying he was “pleased” at the prompt resolution. He added that the FCC “will remain vigilant while the negotiations continue.”

Jeff Blum, Dish Network’s senior vice president and deputy general counsel, issued a statement thanking the FCC for its intervention. “We are grateful for the FCC’s work on behalf of consumers to actively broker a productive path forward,” he said.

Not so fast, says Sinclair. In a strongly worded statement Thursday, the broadcaster came out against the agency’s butting in. As the D.C. media reporter Katy Bachman reported, Sinclair said the FCC was more of a hindrance than a help:

“We understand the temptation for the FCC to take credit for resolving this impasse, but their intervention had nothing to do with it. We were very close to a resolution well before Chairman Wheeler got involved. In fact, the FCC process actually delayed the resolution, because it added more issues to negotiate, which lengthened DISH’s service interruption, not shortened it. And it is important to remember that our stations never went off the air in any of those markets, but were consistently available free of charge to our viewers, as well as through DISH’s competitors.”

Fees For Free Airwaves

Sinclair’s attempt to downplay the FCC’s intervention is understandable. The FCC is already investigating the retransmission fees that broadcasters charge pay-TV operators, and each high-profile blackout brings that much more attention to the issue. Some pay-TV providers are calling for “substantial reforms,” while analysts speculate about whether the retransmission boom is reaching a tipping point.

Although broadcast signals are available over the airwaves for free, the 1992 Cable Act gave broadcasters the right to negotiate with providers for “retransmission consent.” Retrans fees were uncommon a decade ago, but they have mushroomed in recent years as media consolidation has given station owners greater bargaining leverage. Sinclair, for instance, owns ABC, NBC, CBS and Fox affiliates throughout much of the South and Midwest, and it controls two major broadcast stations in about a dozen markets, which makes for a powerful arsenal at the negotiating table.

Richard Greenfield, an analyst with BTIG Research, called Sinclair downright greedy in a blog post this week, saying its appetite for higher fees could “spoil the retrans party for the entire broadcast industry.” For two years, he wrote, BTIG has been warning that the government will get involved if broadcasters push too hard, too fast.

“The FCC and Congress are already increasingly focused on how the cable bundle has grown far too expensive, with retrans negotiations playing a central role,” he wrote. “Sinclair’s actions vis-a-vis DISH look to us like lighting a match in a dry brush field.”

According to financial information firm SNL Kagan, retransmission fees are expected to blow past the $9 billion mark by 2020.

In a statement earlier this week, TVFreedom.org, a coalition of broadcasters, blamed Dish Network for the blackout. Robert Kenny, a spokesman for the group, said the satellite TV provider has been involved in four of 13 retransmission consent disputes this year, and that the timing is no coincidence.“The TV blackout strategy executed by Dish is deliberately timed to create hysteria and persuade the FCC to alter rules to give them a regulatory advantage,” he said.

Christopher Zara covers media and culture. News tips? Email me . Follow me on Twitter @christopherzara .