Tacoma's Click! network raised prices in 2010 in order to cover increases in retransmission fees for its television feeds. Fees have continually risen for Click! and other networks and, according to Tacoma's News Tribune, will continue to rise. The market is fundamentally broken, with small providers struggling to keep up as sports programming shoots through the roof and companies like Comcast merge with content owners.
In Tacoma, the situation was so bad it led to a fee dispute between KOMO and Click! network that resulted in a channel blackout on the network. The News Tribune pursued document requests early in 2014 to obtain copies of the retransmission agreements at the center of the dispute between the network and KOMO. The documents revealed that agreements with several broadcasters rewarded broadcasters significant increases in retransmission fees. Over a six year period, KOMO's rate increased 416 percent.
In a recent update, the News Tribune reports that the new contracts include yet another significant increase:
New contracts that took effect Jan. 1 show the broadcasters’ fees are rising far faster than inflation.
No fee has increased over the years more than that of Seattle broadcaster KOMO. In 2009, the broadcaster received only 31 cents per month per home from Click. That amount has soared this year to $2.43 — a 684 percent increase.
Had the broadcaster’s fee risen equal to inflation, KOMO would earn only 34 cents per subscriber — or approximately $78,000 for all of 2015.
Instead, the new fee structure will mean Click pays about $561,000 this year. That cost is likely to be passed down to the utility’s 19,250 subscribers.
Chris Gleason, speaking on behalf of Tacoma Public Utilities, said the utility board will now have to consider a 17.5 percent rate increase for 2015. The original plan was to incorporate a 10 percent increase in 2015 and a similar increase in 2016. Four other channels are instituting similar increases:
“We don’t really have a lot of bargaining power with these broadcasters,” Gleason said. “... We do negotiate with them but there’s not a lot of leverage for us.”
Escalating fees could accelerate the trend of “cord cutters” — people who don’t have a cable subscription and who watch shows online.
All providers must contend with these increases in retansmission fees but small networks are particularly hurt because they cannot afford to buy the entities that create the fees. Comcast can hedge against increasing prices by demanding an ownership stake in the channel or buying them outright.
The largest cable companies also have more leverage - a channel is more reluctant to go dark across Comcast's millions of viewers than the 20,000 on Click!. The idea that we can have a competitive market for these services while content owners hold all the cards is misguided and we believe the FCC and Congress should be addressing these problems before more small cable companies are forced out of the market.