It would have been something to be in D.C. with lobbyists for CBS, Disney and brethren as word came Thursday that South Carolina’s Jim DeMint (R) would be leaving the Senate. Oh, the jubilation! Did anyone yell “call Morton’s and order surf and turf -- let’s have the holiday party now”?
DeMint surprisingly said he would bolt to take over as president of the Heritage Foundation, the right-wing think tank, where he will replace Ed Feulner. Feulner made about $1.1 million in 2010 and presumably larger amounts in the ensuing years.
Had the media giants and their trade group, the National Association of Broadcasters (NAB), known DeMint was considering leaving -- and if it were legal -- they might have asked Heritage if they could help sweeten the financial offer. The money would be pocket change for them and they would remove a legislator who’s taken steps that could negatively impact one of their huge -- and growing -- revenue streams: retransmission consent payments for carriage of local stations.
Election Day had actually already made the potential for DeMint to cause them trouble on that front considerably less. The results will keep Democrats in control of the Senate. So the tea-partying DeMint would not have taken over as chairman of the Senate committee overseeing communications policy.
Still, he would have been around probably as the ranking member on the committee to press for the Next Generation Television Marketplace Act and jab broadcasters in hearings.
Speaking of which, broadcasters might be heartened should President Obama tap Massachusetts Sen. John Kerry (D) to be Secretary of State. Kerry is the chairman of a subcommittee, where he’s shown an interest in altering retransmission consent rules in a way that could be unpalatable to them and he's called multiple hearings. Like DeMint, he’s been on the case in the wake of blackouts, where stations have gone off the air in disputes with cable, satellite and telco TV operators over retransmission dollars they'd receive.
Both DeMint and the NAB seem to agree that the Next Generation Television Marketplace Act would eliminate the retrans payments. And the NAB is staunchly opposed to the legislation. But even if it were passed, it might have minimal impact on broadcasters (certainly large ones), given the way the retrans ecosystem has evolved. The money would likely keep coming. It would just be called something else.
Broadcasters, however, don’t want to take the chance. Retrans dollars are transforming their business, allowing them to be less reliant on the ad market. That will only become more critical as DVR-enabled ad skipping spreads. The emergence of the retrans payments -- for which CBS CEO Leslie Moonves deserves immense credit -- has allowed the Big Four networks to relatively quickly go from one revenue stream to three.
In addition to advertising, networks are collecting payments from operators for their fleet of owned stations and a slice of the retrans dollars their affiliates are getting. The affiliates don’t love that, but are still ecstatic about the growing dual-revenue stream they now have.
DeMint has been pushing the legislation along with Rep. Steve Scalise (R-Louisiana), who has sponsored it in the House. When announcing it, they said their aim was to get rid of the retransmission consent rules and usher in a free market, where station groups negotiate for carriage in the same “deregulated environment” that an ESPN, CNN or TNT does. Stations and cable channels would in essence be on equal footing vis-à-vis cable operators.
But that’s pretty much the case now. Disney and NBCUniversal are cutting wide-ranging deals covering not just the carriage of their ABC and NBC stations, but also their cable networks. De facto, there's no difference between the two.
The reason that’s emerged is station groups are opting against a “must-carry” route, where they could demand an operator carry their stations, but they would receive no payment.
The DeMint/Scalise legislation looks to get rid of that “must-carry” provision and the NAB is fighting back. A repeal would probably no longer be a problem for networks and their affiliates, but the NAB argues it would hurt small independent stations and some broadcasting in Spanish or other languages. Those stations count on “must-carry” to ensure they get on air.
Even if DeMint had stayed and continued to pursue the legislation, who knows if it would have gained any traction? It had no co-sponsors in the senate.
Scalise, however, remains in the House and depending on his role could continue to hold hearings and look for a senator to reintroduce the bill. But if broadcasters and operators cut down on the high-profile blackouts, neither side may have much to worry about in terms of damaging legislation.