FPB says keeping affiliates will be costly

By Kevin Wheatley Published:

Monthly cable TV rates for Frankfort Plant Board customers will likely go up early next year after FPB negotiates deals to continue carrying several Louisville and Lexington network affiliates.

Plant board officials can’t say how much of an increase cable customers may see, but the last time it negotiated retransmission fees in 2008, FPB paid Louisville and Lexington affiliates $1.35 per customer each month and raised monthly cable rates $1.30 as a result.

This time, FPB estimates the total cost of retransmission fees may reach $6 per customer per month.

That would be about $1.2 million each year based on FPB’s 16,400 cable customers, but the overall cost will be unknown until the deals are finalized on or before Dec. 31.

Cable providers have to negotiate retransmission consent agreements with stations every three years. Those fees typically increase mainly because of lost advertising revenue and higher costs paid by affiliates to broadcast national programming, says John Higginbotham, FPB’s cable superintendent.

With a limited customer base compared to larger companies like Insight or Time Warner Cable, FPB and other independent cable providers have little advantage in retransmission negotiations, Higginbotham said.

“The thing is that small independent guys typically pay a disproportionate license fee than the big cable companies because we just don’t have leverage,” he said.

WHAS, WDRB, and WLKY – the ABC, FOX and CBS affiliates in Louisville – and WLEX, WKYT, WDKY and WTVQ – the NBC, CBS, FOX and ABC affiliates in Lexington – have notified FPB that they want to stay on the local cable lineup, according to Higginbotham.

Only WAVE, Louisville’s NBC affiliate, hasn’t sent a letter, but Higginbotham says he expects the paperwork “just hasn’t reached us yet.” Negotiations typically heat up in late October or early November as the Dec. 31 deadline draws closer, he says.

If the deadline lapses without a deal, the channels will go dark.

“If we don’t have a new deal in place, I no longer have the consent of these stations to carry them,” Higginbotham said.

“… We’re not dropping them. They’re forcing us to drop them because I don’t have their consent to carry them any more.”

The plant board didn’t pay retransmission fees in 2002 and 2005, but WDKY went black for about eight months in 2006 after it couldn’t reach an agreement with FPB. The FOX affiliate didn’t charge to return in October that year.

Louisville affiliates went down for about a month in 2009 after a similar showdown with the plant board. The agreement that followed bumped the total cable rate increase that year to $1.30, approved to help cover the overall cost of $1.35 per customer per month.

FPB can’t disclose individual affiliate fees because of confidentially agreements, but it can share the final sum.

That number is expected to reach $6 per customer monthly in 2012 based on business and trade reports, Higginbotham says.

“What we’re reading, what we’re seeing, what our best guess is, we projected that this $1.35 might go as high as $6 if we kept everything,” Higginbotham said.

FPB didn’t seek a rate increase in July in anticipation of the retransmission fees and upcoming negotiations with Fox News and Fox Sports South, Higginbotham said. The plant board’s directors typically hold a public hearing 30 days before voting on raising cable rates.

However, FPB can shrink the retransmission fees’ cost at the negotiating table, plant board officials say.

It could decide to carry only Louisville or Lexington affiliates, but Higginbotham said that would put FPB at a competitive disadvantage with satellite TV companies.

A split would also prove unpopular to some who prefer one city’s sports and news programming – notably University of Kentucky and University of Louisville basketball – to the other’s, he said.

Some also watch weather coverage on Louisville stations when severe weather approaches Frankfort.

“When Lexington TV started, we started carrying them, and so our customers have come to rely on and expect to have multiple affiliates,” he said.

“So how do you drop them, really? It’s tough to do that.”

FPB also hopes to use customers’ viewing habits for some leverage while negotiating with affiliates, officials say.

Some 6,000 plant board cable boxes – about 37 percent of all FPB cable customers – had viewership tracking software installed in the last couples of weeks, Higginbotham said.

Viewership numbers will show FPB which affiliates are most popular with its customers, possibly helping the plant board land a better deal, he said.

Those numbers, which won’t be available until the program runs about a month, will also tell the plant board which shows are popular with its customers, Assistant General Manager Ron Thomas said.

“… Let’s just say it’s ABC just for an example, and they’ve got the top-rated show across the country, and they use that as a justification for wanting whatever fee they’re asking for,” Thomas said.

“Well, we’ve got the data that shows no one’s watching that, so why should we pay for it?”

Still, it’s too early to tell how much FPB will pay to broadcast Louisville and Lexington stations if the plant board decides to keep both.

“We have to forecast are we going to keep all the affiliates or not?” Thomas said.  “In that mix, what’s the price range?”

“There’s too many variables at this point to say one way or another because all that’s going to come into play as far as a recommendation by us and a decision by the board.”

 

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