The government wants to make sure you don't miss televised events such as the Super Bowl or the latest episode of "The Big Bang Theory."
The U.S. Federal Communications Commission is considering whether to restrict tactics that broadcasters -- like Super Bowl host and "Big Bang" presenter CBS -- can use as they try to extract greater fees from cable and satellite TV providers.
Unfortunately for broadcasters, that could mean a loss of clout as they try to make up for sluggish advertising revenue.
"This clearly bears watching for media companies," Paul Gallant, a Washington-based analyst with Guggenheim Securities, said in a note Thursday.
Impasses in contract negotiations are increasingly leading to programs temporarily disappearing from pay-TV systems, and FCC Chairman Tom Wheeler says the agency should act on behalf of consumers in such disputes. The agency is asking for comments on proposed ground rules during contract negotiations. The FCC didn't propose a ban on blackouts, but its order asked whether "causing consumers harm to enhance negotiating leverage" should be a factor as it considers whether negotiating tactics are fair.
145 blackouts in 2015
Restrictions would come at a bad time for broadcasters: Their advertising growth has been slow as viewers turn to online video and other web distractions, and as a result they rely increasingly on fees that subscription-TV providers pay for their content. That income, which represented 1% of TV station revenue in 2006, is projected to climb to 25% by 2019, according to data compiled by Bloomberg.
In August, about 5 million satellite-TV customers were left without local channels when Sinclair Broadcast Group temporarily withheld its content from Dish Network subscribers during contract talks. The signal was restored after the FCC intervened. Time Warner Cable went a month in 2013 without CBS programming during a fee dispute, and lost customers in the process.
Disputes have triggered 145 blackouts so far in 2015, compared with 107 last year and 127 in 2013, according to the American Television Alliance, an advocacy group that represents cable and satellite companies. TVfreedom, which represents broadcasters, offers a different count, saying this year has seen 14 impasses that resulted in program disruptions, compared with 13 last year and 22 in 2013.
Some signal blackouts in 2014 lasted just a day or two, but others lingered for weeks or even months, according to a Bloomberg Intelligence report on Friday citing data from SNL Kagan.
The tone of the FCC's inquiry, released Wednesday, "is not balanced and is focused on practices of broadcasters," Barclays analyst Kannan Venkateshwar said in a note.
Taking blackouts online
The agency in its notice asked whether broadcasters should be allowed to demand that pay-TV systems carry sibling non-broadcast channels, a practice known as bundling. The agency also asked whether broadcasters may block online access to network shows by pay-TV subscribers during a dispute. CBS cut online access for Time Warner Cable subscribers during their 2013 dispute, the agency said.
Competition between cable and satellite providers has increased leverage by broadcasters, who wield "must-have" programming and so hold a threat of customer loss over the pay-TV providers, the FCC said in its order. As a result, "fees have steadily grown and are projected to increase further, thereby applying upward pressure on consumer prices," the agency said.
The National Association of Broadcasters, with members including CBS, Comcast's NBC, 21st Century Fox Inc.'s Fox and the Walt Disney Co.'s ABC, said that "nothing in this proceeding will necessarily translate to lower cable prices for consumers."
Dennis Wharton, spokesman for the trade group, said the FCC action benefits Dish, AT&T, Time Warner Cable, Charter Communications and Verizon Communications.
"Consumers will be left wondering why the FCC is working overtime to tip the scales even further in favor of these mega-companies," Mr. Wharton said in an e-mailed statement.
Dish in a statement said it was "pleased" with the FCC's action. With rates and blackouts increasing, "real reform is needed to protect consumers," said Jeff Blum, senior VP at the Englewood, Colorado, company.
Brian Dietz, a spokesman for the National Cable & Telecommunications Association, said the trade group wasn't commenting.
Subscribers lost amid the fights
Broadcasters have demanded higher rates from cable- and satellite-TV providers that deliver their programming to consumers. Fees paid to broadcast networks and stations by subscription TV services may reach $6.3 billion this year, 7% higher than an earlier projection of $5.9 billion, according to data compiled by Bloomberg Intelligence. Fees are projected to rise 63% from this year to $10.3 billion by 2021.
Time Warner Cable lost about 300,000 video subscribers during the third quarter of 2013, when it had its dispute with CBS. The fight that blocked signals in New York, Los Angeles and Dallas ended as Time Warner Cable agreed to pay more for the right to carry CBS. Charter has proposed buying Time Warner Cable.
CBS, whose stable of popular shows ranges from "NCIS" to "The Amazing Race" to "The Good Wife," has led the way in extracting fees from cable, satellite and phone companies to pay for traditionally free broadcast TV. It is expected to receive $1.4 billion in affiliate transmission fees in 2015, followed by Fox at $1.24 billion.
"We have the most watched programming there is anywhere, and we will get paid the appropriate amount for it," CBS CEO Leslie Moonves said Aug. 5 on an earnings call.
Shannon Jacobs, a CBS spokeswoman, declined to comment.
-- Bloomberg News