RiseStar
December 14th, 2008, 12:57 AM
Seth Tupper The Daily Republic
Published Friday, December 12, 2008
A national trend of disputes pitting broadcasters against cable and satellite television providers has spread to eastern South Dakota, putting upwards of 15,000 viewers at risk of losing channels or suffering a rate increase.
KSFY, the Sioux Falls ABC affiliate that serves the eastern part of the state, is in a dispute with four cable television providers. KSFY has historically given its signal to the cable providers for free — as have other broadcasters — but KSFY and its Texas-based parent company, Hoak Media, now want to charge for it.
Negotiations on a price for what’s known as a “retransmission” agreement have failed so far. If new agreements or extensions to the existing free agreements are not reached by Dec. 31, KSFY and its popular ABC programs, such as “Desperate Housewives” and “Dancing with the Stars,” could be dropped from the cable lineups of Garretson-based Alliance Communications, Clear Lake-based Interstate Telecommunications Cooperative (ITC), Highmore-based Venture Communications Cooperative and Woonsocket-based Santel Communications. Alternatively, if a deal is reached on a price, the cable companies are likely to pass the added cost on to their customers.
The four cable companies serve a combined 15,349 subscribers, according to the American Cable Association in Pittsburgh, which represents all four. That number includes more than 1,000 subscribers to Mitchell Telecom, a Mitchell-based subsidiary of Santel Communications.
Matt Polka, president and CEO of the American Cable Association, said the small South Dakota cable companies are being “pushed around” by KSFY owner Hoak Media, a “big media company” that owns 24 television stations in seven states.
“KSFY does not care about your local consumers,” Polka said Thursday. “All KSFY wants is paid, because they’re losing money. If they could make it up out of the pockets of your local citizens, Hoak Media would do that in a second and not care one bit.”
Dennis Wharton, executive vice president of the National Association of Broadcasters in Washington, D.C., disagreed with that assessment.
“Broadcasters provide the highest-quality, highest-rated programming, and it’s not outside the realm of reasonableness for us to seek modest compensation for that programming,” Wharton said.
A similar dispute is unfolding between the Sioux Falls CBS affiliate KELO and DISH Network. That dispute remained unresolved Thursday evening, and KELO said it would soon be dropped from the satellite provider’s channel lineup.
A nationwide issue
Kelly Manning, general manager of KSFY, said the station is merely trying to extract a value from its valuable programming.
“This is just a new way of doing business with our cable operators,” Manning said. “As different as it might seem for them, these negotiations are going on all around the country in a similar fashion.”
Similar disputes are indeed playing out across the country, according to Polka. He said the cause is a 16-year-old federal law that grants exclusivity to TV networks like KSFY and prevents cable operators like Mitchell Telecom from shopping around in other markets. Mitchell Telecom cannot, for example, drop KSFY and instead pick up a lower-cost ABC affiliate from a nearby market such as Sioux City, Polka said.
The effect of the federal law, according to Polka, is that stations like KSFY can use their exclusivity as leverage. Cable operators such as Mitchell Telecom have no other way of acquiring ABC programming for their cable system and are effectively forced into paying the price that the TV stations demand.
Even though the existing federal law is 16 years old, many television stations did not seek to capitalize on their leverage until recently, Polka said. That’s because the state of the broadcasting business has recently deteriorated and is, as he described it, “as bad as it has ever been.”
Evidence of financial difficulties at KSFY surfaced earlier this week when it was reported that the station laid off four employees, including on-air personalities. Manning confirmed the layoffs Thursday but said they were unrelated to the negotiations with the cable providers.
“That was a separate discussion than what’s going on here,” Manning said. “That was probably based more on what we’re seeing forecast for 2009, and that next year may be a difficult year. What we’re trying to do is put our resources in the right areas so we can serve the viewer.”
Polka said the layoffs are further evidence that the price KSFY wants from the cable companies is an “outrageous cash demand” and an attempt to leverage its exclusivity. He said the American Cable Association is advocating new legislation that would address the organization’s concerns about the federal law, but there is little support for the effort.
The National Association of Broadcasters opposes the American Cable Association’s views on exclusivity. Wharton, of the NAB, said exclusivity provides important benefits for television viewers.
“If there is a weather emergency in Mitchell or Sioux Falls, you want viewers to have access to programming in that area,” Wharton said. “If there’s a tornado coming through there, you don’t want to have programming being imported from North Dakota.”
Setting a price
Wharton said there have been thousands of negotiations similar to the ones involving KSFY and the cable operators, and he could “count on both hands the number of times there has actually been a disruption in service.” He predicted “a lot of back and forth” between KSFY and the cable companies and perhaps even an extension of current agreements, but he said it’s very likely a deal will get done.
Both KSFY and Mitchell Telecom revealed the amount that KSFY is seeking, but each slanted it to their own benefit. Mitchell Telecom described the proposed price as 90 cents per subscriber per month, while KSFY used the mathematically equal but less-expensive-sounding 3 cents per subscriber per day.
Polka said 90 cents might not sound like much, but it could encourage other stations to make similar demands. If all four network affiliates in Sioux Falls demanded $1 per subscriber per month from cable providers, cable bills could immediately rise by $4, Polka said. Industry wide, he added, such price increases could result in “billions of dollars” coming out of consumers’ pockets and going into the pockets of television executives.
Furthermore, Polka said, the proposed 90-cent price far exceeds other deals that have been struck around the country for 5 or 10 cents per subscriber per month.
“Some stations understand that, look, it is to their benefit to be carried, and they need to be reasonable in their negotiations,” Polka said. “But there are situations like this with KSFY all across the country right now.”
Scott Peper, subsidiary manager of Mitchell Telecom, said KSFY’s proposed 90-cent rate is more than the combined amount that Mitchell Telecom has agreed in principle to pay all of its other network affiliates.
“The hardest pill for us to swallow is the amount they’re asking for,” Peper said Thursday. “We understand things change, but let’s just be realistic in what we’re asking for.”
Ryan Thompson, general manager of Woonsocket-based Santel Communications, made similar statements in a news release.
“We’re not opposed to paying a fair price,” he said. “We recognize KSFY has costs involved in the digital transition, but its demands are beyond reasonable, especially for South Dakota. They’re the highest in South Dakota and even higher than some national cable stations. Ultimately, those costs get passed on to cable customers.”
Manning said KSFY wants to reach an agreement with the cable providers.
“We want nothing more than to be carried on Santel and Mitchell Telecom,” Manning said, referring to the situation in Mitchell specifically. “It’s important to us and our viewers, and we want to work toward something.”
KELO vs. DISH
KSFY is not the only Sioux Falls station involved in a dispute over payments for its signal. KELO-TV, the CBS affiliate in Sioux Falls, announced on the air Wednesday night that it would disappear from DISH Network’s lineup at midnight because no “carriage agreement” had been reached.
Thursday, KELO said on its Web site that it had extended its deadline for a deal with DISH Network to 6 p.m., but on its 6 p.m. newscast KELO said negotiations had once again failed. KELO said it was asking DISH Network for “less than a penny per day per subscriber.”
DISH Network did not respond immediately to The Daily Republic’s request for an interview Thursday.
Both KELO and KSFY have taken the negotiations public with announcements on their Web sites. Earlier this month, KSFY began a scroll at the bottom of its screen informing viewers of the situation with the four cable providers and advising affected viewers to, in effect, drop their cable subscription and instead subscribe to Dish Network or Direct TV.
Peper, of Mitchell Telecom, said he viewed KSFY’s scroll as an escalation of the dispute into a public-relations battle.
“It’s beginning to shape up in that fashion,” he said. “Obviously, the first stone thrown is when they started running scrolls.”
Without an agreement, Peper warned, ABC television coverage could end abruptly on New Year’s Eve for the affected subscribers.
“You might see the ball drop,” he said. “Or you might just see ‘10, 9, 8, 7, 6 …’ ”
Published Friday, December 12, 2008
A national trend of disputes pitting broadcasters against cable and satellite television providers has spread to eastern South Dakota, putting upwards of 15,000 viewers at risk of losing channels or suffering a rate increase.
KSFY, the Sioux Falls ABC affiliate that serves the eastern part of the state, is in a dispute with four cable television providers. KSFY has historically given its signal to the cable providers for free — as have other broadcasters — but KSFY and its Texas-based parent company, Hoak Media, now want to charge for it.
Negotiations on a price for what’s known as a “retransmission” agreement have failed so far. If new agreements or extensions to the existing free agreements are not reached by Dec. 31, KSFY and its popular ABC programs, such as “Desperate Housewives” and “Dancing with the Stars,” could be dropped from the cable lineups of Garretson-based Alliance Communications, Clear Lake-based Interstate Telecommunications Cooperative (ITC), Highmore-based Venture Communications Cooperative and Woonsocket-based Santel Communications. Alternatively, if a deal is reached on a price, the cable companies are likely to pass the added cost on to their customers.
The four cable companies serve a combined 15,349 subscribers, according to the American Cable Association in Pittsburgh, which represents all four. That number includes more than 1,000 subscribers to Mitchell Telecom, a Mitchell-based subsidiary of Santel Communications.
Matt Polka, president and CEO of the American Cable Association, said the small South Dakota cable companies are being “pushed around” by KSFY owner Hoak Media, a “big media company” that owns 24 television stations in seven states.
“KSFY does not care about your local consumers,” Polka said Thursday. “All KSFY wants is paid, because they’re losing money. If they could make it up out of the pockets of your local citizens, Hoak Media would do that in a second and not care one bit.”
Dennis Wharton, executive vice president of the National Association of Broadcasters in Washington, D.C., disagreed with that assessment.
“Broadcasters provide the highest-quality, highest-rated programming, and it’s not outside the realm of reasonableness for us to seek modest compensation for that programming,” Wharton said.
A similar dispute is unfolding between the Sioux Falls CBS affiliate KELO and DISH Network. That dispute remained unresolved Thursday evening, and KELO said it would soon be dropped from the satellite provider’s channel lineup.
A nationwide issue
Kelly Manning, general manager of KSFY, said the station is merely trying to extract a value from its valuable programming.
“This is just a new way of doing business with our cable operators,” Manning said. “As different as it might seem for them, these negotiations are going on all around the country in a similar fashion.”
Similar disputes are indeed playing out across the country, according to Polka. He said the cause is a 16-year-old federal law that grants exclusivity to TV networks like KSFY and prevents cable operators like Mitchell Telecom from shopping around in other markets. Mitchell Telecom cannot, for example, drop KSFY and instead pick up a lower-cost ABC affiliate from a nearby market such as Sioux City, Polka said.
The effect of the federal law, according to Polka, is that stations like KSFY can use their exclusivity as leverage. Cable operators such as Mitchell Telecom have no other way of acquiring ABC programming for their cable system and are effectively forced into paying the price that the TV stations demand.
Even though the existing federal law is 16 years old, many television stations did not seek to capitalize on their leverage until recently, Polka said. That’s because the state of the broadcasting business has recently deteriorated and is, as he described it, “as bad as it has ever been.”
Evidence of financial difficulties at KSFY surfaced earlier this week when it was reported that the station laid off four employees, including on-air personalities. Manning confirmed the layoffs Thursday but said they were unrelated to the negotiations with the cable providers.
“That was a separate discussion than what’s going on here,” Manning said. “That was probably based more on what we’re seeing forecast for 2009, and that next year may be a difficult year. What we’re trying to do is put our resources in the right areas so we can serve the viewer.”
Polka said the layoffs are further evidence that the price KSFY wants from the cable companies is an “outrageous cash demand” and an attempt to leverage its exclusivity. He said the American Cable Association is advocating new legislation that would address the organization’s concerns about the federal law, but there is little support for the effort.
The National Association of Broadcasters opposes the American Cable Association’s views on exclusivity. Wharton, of the NAB, said exclusivity provides important benefits for television viewers.
“If there is a weather emergency in Mitchell or Sioux Falls, you want viewers to have access to programming in that area,” Wharton said. “If there’s a tornado coming through there, you don’t want to have programming being imported from North Dakota.”
Setting a price
Wharton said there have been thousands of negotiations similar to the ones involving KSFY and the cable operators, and he could “count on both hands the number of times there has actually been a disruption in service.” He predicted “a lot of back and forth” between KSFY and the cable companies and perhaps even an extension of current agreements, but he said it’s very likely a deal will get done.
Both KSFY and Mitchell Telecom revealed the amount that KSFY is seeking, but each slanted it to their own benefit. Mitchell Telecom described the proposed price as 90 cents per subscriber per month, while KSFY used the mathematically equal but less-expensive-sounding 3 cents per subscriber per day.
Polka said 90 cents might not sound like much, but it could encourage other stations to make similar demands. If all four network affiliates in Sioux Falls demanded $1 per subscriber per month from cable providers, cable bills could immediately rise by $4, Polka said. Industry wide, he added, such price increases could result in “billions of dollars” coming out of consumers’ pockets and going into the pockets of television executives.
Furthermore, Polka said, the proposed 90-cent price far exceeds other deals that have been struck around the country for 5 or 10 cents per subscriber per month.
“Some stations understand that, look, it is to their benefit to be carried, and they need to be reasonable in their negotiations,” Polka said. “But there are situations like this with KSFY all across the country right now.”
Scott Peper, subsidiary manager of Mitchell Telecom, said KSFY’s proposed 90-cent rate is more than the combined amount that Mitchell Telecom has agreed in principle to pay all of its other network affiliates.
“The hardest pill for us to swallow is the amount they’re asking for,” Peper said Thursday. “We understand things change, but let’s just be realistic in what we’re asking for.”
Ryan Thompson, general manager of Woonsocket-based Santel Communications, made similar statements in a news release.
“We’re not opposed to paying a fair price,” he said. “We recognize KSFY has costs involved in the digital transition, but its demands are beyond reasonable, especially for South Dakota. They’re the highest in South Dakota and even higher than some national cable stations. Ultimately, those costs get passed on to cable customers.”
Manning said KSFY wants to reach an agreement with the cable providers.
“We want nothing more than to be carried on Santel and Mitchell Telecom,” Manning said, referring to the situation in Mitchell specifically. “It’s important to us and our viewers, and we want to work toward something.”
KELO vs. DISH
KSFY is not the only Sioux Falls station involved in a dispute over payments for its signal. KELO-TV, the CBS affiliate in Sioux Falls, announced on the air Wednesday night that it would disappear from DISH Network’s lineup at midnight because no “carriage agreement” had been reached.
Thursday, KELO said on its Web site that it had extended its deadline for a deal with DISH Network to 6 p.m., but on its 6 p.m. newscast KELO said negotiations had once again failed. KELO said it was asking DISH Network for “less than a penny per day per subscriber.”
DISH Network did not respond immediately to The Daily Republic’s request for an interview Thursday.
Both KELO and KSFY have taken the negotiations public with announcements on their Web sites. Earlier this month, KSFY began a scroll at the bottom of its screen informing viewers of the situation with the four cable providers and advising affected viewers to, in effect, drop their cable subscription and instead subscribe to Dish Network or Direct TV.
Peper, of Mitchell Telecom, said he viewed KSFY’s scroll as an escalation of the dispute into a public-relations battle.
“It’s beginning to shape up in that fashion,” he said. “Obviously, the first stone thrown is when they started running scrolls.”
Without an agreement, Peper warned, ABC television coverage could end abruptly on New Year’s Eve for the affected subscribers.
“You might see the ball drop,” he said. “Or you might just see ‘10, 9, 8, 7, 6 …’ ”