The blackout of Sinclair Broadcast Group’s 129 stations on Dish could turn out to be very costly for the broadcast business, if the Federal Communications Commission decides that Sinclair is the party to blame.
Rich Greenfield, an analyst with BTIG Research, believes Sinclair committed “blatant retrans violations” that will give regulators just what it needs to change the retransmission consent regime in favor of the pay TV business.
“Sinclair’s actions vis-a-vis DISH look to us like lighting a match in a dry brush field. The government is looking for reasons to get more involved to help consumers. Sinclair may have finally given them a blatant enough excuse,” Greenfield wrote. “Unfortunately for broadcasters the end result may not simply impact Sinclair, it could very well lead to a reform of retransmission consent negotiations that helps level the lopsided playing field.”
Until now, Wheeler, like other FCC chairman, has been reluctant to intervene in retransmission consent disputes. This time he is jumping in the middle of the biggest blackout yet. Wheeler convened an emergency meeting with Dish and Sinclair Broadcast Group to “get to the bottom” of the blackout affecting 5 million consumers.
And, if Wheeler’s past decisions regarding broadcasters is any indication, broadcasters may be the ones to lose.
Sinclair’s violations, according to Greenfield and based on Dish’s FCC complaint, were Sinclair’s attempt to negotiate retrans for 32 stations it did not own, in addition to its owned stations; and trying to force Dish to carry and pay affiliate fees for a cable network it hopes to launch later this year.
Sinclair has already pulled back on negotiating for the 32 stations it manages through local marketing agreements, but in Dish’s press statements Wednesday, Sinclair is still trying to negotiate for an unidentified, un-launched cable network.
“This is the first time we have ever heard of a station group trying to get affiliate fees for a cable network that it does not even own/operate at the time,” Greenfield wrote Wednesday in a research note.
Given the FCC’s recently-opened rule making to review what practices define “good faith” negotiations, Greenfield offers a couple of reasons why Sinclair would risk a blackout and government intervention.
First, Greenfield reasons that Sinclair could be worried about reverse retransmission consent, a growing cost for station groups that are forced to pay a percentage of their retransmission fees to networks. Second, there’s the greed factor.
“With NFL opening day looming, Sinclair probably believed that Dish would simply capitulate to anything it demanded at the last minute, even if it was an unrelated cable network that they do not yet own/operate,”Greenfield wrote. “Unfortunately for Sinclair, the regulatory environment is different now than it has been in the past. And, they are trying to go head-to-head with Charlie Ergen, who fights hard for what he believes and is notoriously litigious.”