In any normal functioning market, businesses freely decide to contract for products and services. Retailers in particular decide which product lines they will or will not carry, and there is often intense negotiating because of vigorous competition.
The relationship between broadcasters and cable television is something less than a normal functioning market, thanks to a governing regulatory regime that distorts negotiations and fails to take into account the competitive nature of today’s video marketplace.
It’s within this context that the current dispute between Cablevision and Fox must be viewed.
After an extended period of negotiation, Fox and Cablevision have failed to reach an agreement and as a result Cablevision customers have lost access to Fox channels.
We find ourselves sympathetic to all parties involved in these disputes. Consumers have had their expectations disrupted, which accrues to the public relations disadvantage of both Cablevision and Fox. This disruption was surely no small factor in either party’s risk analysis, knowing as they do that consumers have choice in today’s video marketplace and can both change video providers and also alter their viewing habits. It’s a high risk strategy for both parties.
Video service programmers are currently forced into a difficult situation: They must deal with “must carry” regulations which some broadcasters use to gain free access to video outlets. And, of course, as broadcasters with more valuable content demand increased prices for their products, video providers almost certainly must pass those costs along to their customers as higher prices.
But broadcasters are entitled to fair value for their content. Providing prime time shows, sports programming, local news, or other local content, requires considerable time, effort and resources, and broadcasters bear almost all of the market risk of their product.
This dispute, and similar such disputes, has resulted in demand that the FCC ride to the rescue with even more government. But that solution is a bit like having Jesse James ride to the rescue of a frontier Missouri bank.
Video service providers pay for other content and so should pay broadcasters for their content. Free and direct negotiations should be encouraged, without threats of compulsory solutions, and the right to enter into (or to NOT enter into) private contracts should rule the day.
The solution is a more free market, leaving the negotiation of retransmission consent agreements to the private marketplace with government on the sidelines providing law enforcement against wrongdoing.