Do TV Stations Compete for Carriage?

According to this article just posted by Broadcasting & Cable, Time Warner Cable asked the FCC “to deny the sale of two TV stations over the issue of joint retransmission-consent negotiations, or put retrans conditions on the sale if the agency does allow them.”  This isn’t the first time that cable operators have complained about stations jointly negotiating retransmission consent — about a year ago both Mediacom and Comcast were complaining about Sinclair negotiating agreements for its owned stations alongside the stations it operated under local marketing agreements.

Antitrust law condemns two competitors getting together and fixing prices or terms; in some cases, where it’s blatant and serves no legitimate business purpose, it may be considered per seillegal, rather than being subject to the more flexible “rule of reason” standard, which calls for a balancing of the procompetitive benefits of a particular arrangement against its anticompetitive effects.

Whether an agreement between broadcasters would be considered a per seviolation, or judged under the rule of reason depends on what procompetitive benefits the stations could proffer.  My guess is that a naked agreement to jointly neogitate would be more likely considered a per se violation than one attendant to a local marketing agreement, where the retransmission consent neogitation is simply one of many jointly-performed business functions.

Under a rule-of-reason analysis, either the Justice Department — the agency charged with enforcement of the antitrust laws in the broadcasting industry — or a private plaintiff would be required to demonstrate adverse competitive effects in the market for carriage.  And that begs the question: is there a market for carriage?

TV stations clearly compete in the market for viewers, and in some cases, for advertisers, but it’s a closer call whether they compete with one another for carriage.  To say that stations so compete is to say that cable operators make decisions about which broadcast stations to carry in a particular market.  Is it really the case that a cable operator such as Time Warner Cable decides between, say, the NBC and the CBS station?  I doubt it.  It’s far more likely the case that the cable operator considers each broadcaster in a market as essential to its lineup.  Drop ABC, and you miss out on Desperate Housewives and Dancing with the Stars; drop CBS or Fox and you don’t get NFL football, NCIS or American Idol; similarly, no NBC means no The Office or 30 Rock.  Put simply, to effectively compete, a cable operator needs them all.

And the same is true for the stations.  They don’t sit around debating which cable, satellite, and telco providers to license their signals to — they want them all.

So, broadcast stations are “must-buys” for cable operators, and cable carriage is a “must-sell” for broadcasters, which suggests that there is little to be gained (and, conversely, little to be lost) by broadcasters jointly negotiating carriage terms.  Accordingly, it seems unlikely fodder for an antitrust challenge.

So, why is Time Warner Cable raising it with the FCC?  I suspect two reasons:

  1. It fits in with the cable industry’s narrative that broadcasters are bad people as the industry fights over retransmission terms generally (nicely illustrated by the highly publicized (and, as of this writing, ongoing) battle between Fox and Cablevision); and
  2. The FCC’s statutory mandate is far broader than that of the Justice Department.  The latter can enforce only the antitrust laws, whereas the FCC can generally do anything it reasonably finds is in the “public interest, convenience, or necessity.”  It has previously noted that competition is one of its policy objectives.

My guess is that the FCC won’t deny the sale on the basis of Time Warner’s complaint, nor do I believe that it will place any retransmission-specific conditions on the transaction.  But, I could be wrong; it wouldn’t be the first time that the FCC has surprised me.

Shameless plug: I discuss competitive issues surrounding local marketing agreements in my recent article Regulating Relationships Between Competing Broadcasters which, I’m told, should be appearing in the Hastings Communications and Entertainment Law Journal any day now.  You can also find it on SSRN.

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So long, Arbitron

This morning’s Inside Radio features several stories about small market broadcasters dropping Arbitron’s ratings services.  Citing rising costs, falling revenues, lousy sample sizes, the perrennial errors and restatements, and inadequate coverage of minority populations, a handful of broadcasters — namely those in smaller markets — are beginning to sell inventory based on results alone.  And according to several of the quoted broadcast executives, it’s working.

It begs the question: did anyone ever really care about local ratings?  National advertisers that buy local time probably used the numbers to allocate their spend across markets, but generally speaking, they have always been of relatively little value to local account executives.  Aside from the most basic ratings figures, like cume, which can be explained relatively easily using plain language, small, local advertisers — even the sophisticated multi-unit businesses — don’t have time to understand the ins and outs of the ratings.  And frankly, they don’t care.  If they can’t buy a flight and see some results, then the numbers are irrelevant.

Of course, as any skilled radio tradesman will tell you, there are lots of factors involved in the success of a radio campaign: scheduling, the creative, and the duration of the campaign.  And that’s where the sales staff ought to focus their efforts: helping the client build a successful campaign from the ground up, make it successful, show the client some results, and they’ll be back for more.  Quarter-hour trends be damned.

As Arbitron fades from relevance in the smaller markets, one wonders how long it will be before they disappear completely.  Even with the new PPM technology, Arbitron appears ill-equipped to measure Internet radio, and really, does anyone really need it?  Internet-based radio is measured by virtue of its transmission through monitored networks, and it’s a fairly simple matter to link that up with basic demographic information through the use of cookies.  Sure, cookie monitoring is controversial and may have accuracy problems of its own, but compared with the sample-size issues that Arbitron faces (which were only exacerbated in major markets as a result of the PPM launch), I bet the numbers are still far more reflective of actual listening patterns.

So, farewell Arbitron.  It’s been fun, but it seems as though you’ve overstayed your welcome.

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In Praise of the Twittersphere

I first learned about yesterday’s incident at the Discovery Communications headquarters via Twitter.  It started with a simple tweet about traffic issues in the Silver Spring area and quickly mushroomed into a torrent of information, updates, and pictures of the scene.  Media outlets, people who worked in the area, and others posted what they saw, and allowed those of us who weren’t at the scene to keep abreast of the rapidly developing story.

I briefly was watching TBD.com‘s online stream, but found it to be typical of TV station crisis coverage: lots of speculation and repetition of the scant facts that were confirmable.  Without question, Twitter had the most comprehensive, up-to-date coverage of the situation and its aftermath.

Legacy journalists have criticized the idea of crowdsourcing news, complaining, in particular, that misinformation or knee-jerk reactions can quickly go viral. But that downfall was also a virtue. Several times throughout the afternoon people had tweeted inaccurate information, or drew connections and conclusions that turned out to be false. Just as the misinformation spread quickly, so too did the debunking. Incorrect facts were quickly corrected by others; other facts were quickly corroborated. Put simply, Twitter appeared to function as a true, unencumbered marketplace of ideas, where the best ideas won. No rambling news anchors, no reporters shoving microphones into random bystander’s faces, no and no buried ledes. Just unadulterated content, filtered by the masses, in 140 character chunks.

Other than a handful of media outlets who were tweeting (and, largely retweeting that which other individuals had already said) there wasn’t an AP member among us.

Is this the future of news?  I sure hope so.

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“Party” Goes On; Cover Charge for Clear Channel

I’m usually on top of trademark issues in the radio industry, so I’m a little embarrassed to admit that I missed this one, particularly because it’s apparently been going on since 2006.

Tradepub All Access announced that Clear Channel has settled claims brought by The Cromwell Group, Inc., a small radio outfit that, according to its web site, owns stations in Tennessee, Illinois, Kentucky, and Indiana. Of the 22 stations Cromwell owns, three use the brand “The Party” to identify themselves; Cromwell sought and received a federal trademark registration for the mark “The Party.”

Clear Channel used the same brand on several of its properties, including stations in Atlanta, Las Vegas, and Denver. Through a series of letters, Cromwell asked Clear Channel to stop using “The Party” on its stations; Clear Channel shot back by accusing Cromwell of unlawfully using “The Fox,” which Clear Channel claims to own.

Cromwell brought suit on December 15, 2006, alleging trademark infringement, unfair competition and false designation, trademark dilution, and a state law contract claim in connection with a prior relationship between Cromwell and Clear Channel concerning The Bob & Tom Show.

[Side note: although the contract claim is tangentially related to a previous trademark scuffle between Clear Channel and Cromwell, it has nothing to do with the “The Party” trademark. One wonders if perhaps Cromwell threw in the contract claim alongside the federal trademark questions in an attempt to have the state claim heard by a federal judge by way of supplemental jurisdiction; because the contract claim doesn’t appear to be substantially related to the trademark claims, though, my money’s on the judge declining to hear the state claim. Since the case was resolved by settlement, though, the issue is moot.]

Although the terms of the settlement have not been disclosed, All Access reports that Clear Channel has agreed to license “The Party” from Cromwell, and that Cromwell “encourages any stations that currently may be utilizing THE PARTY without a license to be proactive in contacting the company.”

The case was brought in the Middle District of Tennessee at Nashville; the case number is 06-cv-01196.

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D.C. Gets a “Fresh” But What’s a “Fresh?”

A few weeks ago (Mon 4/6) Washington, D.C. radio listeners woke up to a new radio station, as CBS Radio flipped it’s classic rock station WTGB to become 94.7 Fresh FM. “Fresh” is a relatively new format launched a year or so ago by veteran adult contemporary programmer Greg Dunkin. According to Vallie-Richards-Donovan, a radio consultancy that briefly handled licensing of the brand, Fresh is targeted at “[t]he much sought after 25-49 audience” by being “contemporary without being too loud or repetitious.”

Fresh is just one of several radio concepts that has launched in recent years that bills itself as more than just a format, but a complete broadcast brand identity comprised of proprietary programming strategies along with a logo and related trade dress, on-air imaging, brand-specific consulting services, music scheduling, and ongoing promotions and marketing support. I’ve come to call these complete format brand concepts as “branded formats” to distinguish them from traditional satellite-delivered “canned” syndicated formats in use by many small market stations.

Branded formats operate in much the same way a franchise system operates. In a conventional franchise model, the franchisor develops a method of doing business, typically associated with a trademark, and then grants licenses — franchises — to independent business owners — franchisees — to use the methods and the brand in their own communities. The essence of franchising is consistency: to ensure that the franchisor’s trademarks remain strong, every franchisee is required to commit to follow the methods and standards set forth by the franchisor. The franchisor maintains the strength and integrity of its marks by ensuring that the customer experience is identical from location to location. After all, what would a McDonald’s be without the golden arches? What would you think of a Dunkin’ Donuts that didn’t serve coffee?

Although the branded format licensing framework is analogous to franchising, the two approaches differ when it comes to consistency. Unlike a franchise, the licensors of branded formats purport to offer a high degree of customization and local responsiveness. This focus on localism makes sense, given that radio stations are licensed to serve a particular community, and FCC licenses require that stations serve the “public interest, convenience, and necessity.” On a more practical level, different radio markets feature different demographic compositions and different competitive landscapes.

According to Vallie-Richards-Donovan’s web site (based on a printout I made on October 13, 2007; the page no longer exists on the company’s web site), Fresh is highly customizable:

Unlike many nationally distributed formats, the Fresh brand is completely tailored to each market. By customized, we mean that every station is specifically designed to accommodate and exploit the opportunities that exist in your specific market. This customization includes target demographics, music, production elements and marketing campaigns. This process can yield different results in each market. As implied, one fresh fm [sic] station can sound dramatically different from another. Just one way the fresh fm [sic] brand is different from other nationally distributed formats!

The customization of a nationally distributed — and nationally protected through U.S. trademark law — begs the question, “what’s a Fresh FM?”

In a traditional franchise, the franchisee buys into a recognized business model and brand identity instead of launching a business from scratch, thereby eliminating an element of risk — in essence, the franchisee is buying a repuation. In the context of branded formats, the reputational element is somewhat undermined by the fact that a station employing a branded format in one market may sound substantially different than a station in another market with the same format.

Put simply, Fresh in New York might sound significantly different than Fresh in Chicago, even though the two stations share similar, proprietary attributes. That fact begs the question, “what’s a Fresh?” Or more appropriately, what legal protections are (or should be) afforded a national brand identity that means different things in different places?

But like Fresh, MOViN seems to mean different things in different markets. In Los Angeles, the recently-defunct KMVN (MOViN 93.9) featured all “old school” rhythmic AC, that is, rhythmic music from the 70s and 80s; the station also used an imaging package that was distinct from the “standard” station imaging offered by the format’s creator.Another branded format offers a similar example of the apparent tension between broadcast localism and the trademark owner’s interest in maintaining national brand consistency. Created by consultant Alan Burns, the MOViN format targets “28-40 year old women who feel too old for hip-hop, but are bored with rock-based Hot AC and not ready for traditional AC.”

Meanwhile in Phoenix, KMVA (MOViN 97.5) touts itself as playing music from “today and back in the day,” and a few hours of listening confirms that the station is based largely on current music, unlike it’s Los Angeles counterpart.

Moreover, a blurb in Radio & Records recently noted that KYMV in Salt Lake City (MOViN 100.7) has been “directed . . . toward more of a CHR/top 40″ direction,” but that it will retain the MOViN identifier.

Three stations, three markets, three different experiences, but each using the same brand. In a typical franchise context, such differentiation would severely weaken the brand; are radio stations different because of their localism obligations?

c/o CSR Media, LLC
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Site design by Chris Reed using Divi 3.19 on Wordpress 5.0.

Homepage header image by IM_photo.

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Disclaimer

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