Hearst Television and Time Warner Continue Their Game of Hardball
By: Bill Brassine
In 12 local television markets viewers might not be able to find their favorite local news on the air today.
Hearst Television, which operates 32 local market network television affiliates, and Time Warner Cable/Insight (TWC), the country’s second largest cable provider are at odds over what is an acceptable carriage fee for Hearst’s local station broadcasts. The result of this is a standoff affecting 14 of the 32 local stations.
As of midnight on Tuesday, July 10th, these 14 stations have been blacked out on TWC. Affected markets include Cincinnati, Boston, Honolulu, Portland (ME), Plattsburgh, Winston-Salem, Kansas City, Lincoln, Louisville, Pittsburgh and Manchester. Most stations are ABC affiliates along with three NBC and one CBS affiliate.
At this time it is hard to predict when the blackout might be lifted. The stations are still available via satellite, over the air and on some smaller cable systems.
Both Sides Have Something to Lose
TWC claims that Hearst issued the blackout and that they are asking for a 300% increase in retransmission fees. They feel an increase of that magnitude is not warranted and would have to be passed on to their subscribers in the form of increased cable subscription fees.
On the other hand, Hearst counters the TWC claim and issued a statement late Tuesday afternoon stating that “TWC’s characterizations of the percentage increase in carriage fees we are seeking are inaccurate.” The statement continues to say, “We have sought a reasonable increase consistent with the increased costs we have to pay for our highly valued programming and the carriage fees now paid to us by TWC’s competitors. TWC is seeking a significant discount off market-based fees that is neither fair nor reasonable.”
Based on the information available, both organizations are placing blame on the other and no one but the two companies knows where the truth really lies. We suspect it lies somewhere in the middle.
TWC Uses Pinch Hitters
In the Louisville, Cincinnati, Winston-Salem and Plattsburgh markets, TWC is retransmitting the network feed from an outside market affiliate owned by Nexstar Broadcasting. For example, in Cincinnati where WLWT’s NBC broadcast has been blacked out, TWC is airing WTWO’s NBC broadcast from Terre Haute, Indiana. This partially solves TWC’s problems with customers wanting NBC programming. While the station carries all network programming, it does not carry local affiliate news coverage.
Impact on Local Advertisers
This not only impacts viewers who want to find their favorite local and national programming, but local advertisers as well. Advertisers with schedules currently placed with these Hearst stations have two options at this time. They can hold tight if they don’t HAVE to be present on the station this week or in the near future. Or they can pull their investment and move it to other local television stations. We have recommended to all Sunrise clients currently advertising on any of these stations to move their dollars to alternative options rather than wait things out and deal with under delivery on ratings.
Continuing to use Cincinnati as the example, there are 896,090 television households in the market. TWC has 465,967 local subscribers in the Cincinnati market (this includes all Northern Kentucky Insight customers). This equates to 52% of the market not receiving WLWT’s NBC broadcast. The other 48% can still receive WLWT’s broadcast over the air, via satellite or other local cable options.
This is a significant void for local advertisers and leaves them with a decision to make. The longer the blackout goes, the more likely they are to pull their investments and reallocate them to other TV stations or even media outlets other than TV.
How Does This Affect Olympic Coverage?
WLWT in Cincinnati along with WPTZ in Plattsburgh, NY and WXII in Winston-Salem, NC are all NBC affiliates with a huge broadcast television event on the horizon. The 2012 London Summer Olympics are set to kick off Friday, July 27 and run through Sunday, August 12th. While all three of these markets currently have out of market NBC coverage in place to satisfy their viewers, they could potentially lose out on huge revenues from local Olympic advertisers if the dispute isn’t settled very soon.
At the end of the day, as the loss of local advertising dollars accumulates, we predict there will be some sort of agreement and resolution in the coming weeks. If not, there are going to be a lot of big local brands looking for new places to redirect those Olympic investments.