The Seattle broadcaster at the center of a fee dispute two years ago that led to a channel blackout on Tacoma’s Click cable system got even more money from the city of Tacoma than previously believed.
Earlier this month, the city of Tacoma released records long held secret. The documents were wrested free after the state Court of Appeals ruled for The News Tribune, which had sought the records ever since KOMO’s owners withheld its signal from Click customers in January 2013.
Those records show that the retransmission agreement KOMO eventually negotiated with the city required Click to pay the broadcaster $1.42 per subscriber per month in 2013. That’s 10 cents more than suggested by a March analysis by The News Tribune that relied on public documents with payment information blacked out and procurement records the city says it inadvertently released to an outside company.
The new records also show that in 2014, KOMO’s rate climbed to $1.60 — a 416 percent increase in just six years.
That’s far more than the Tacoma City Council feared the city would pay when it officially encouraged KOMO’s owner, Fisher Communications, to return to negotiations and end the blackout two years ago. Fisher had proposed fee increases that “represent an increase of 300 percent since 2009 and are significantly higher than rates agreed with any other major local broadcast station,” according to a council resolution authored by Councilman Marty Campbell.
“It frustrates me because ultimately it’s something we have to pass along to our consumers, which are our citizens,” Campbell said Friday. “We don’t like to pass along rate increases.”
The recently released documents also show:
• Seattle broadcaster KING was paid about half as much as The News Tribune’s analysis showed. Click initially overpaid the station by more than $100,000 over eight months — money that was later refunded — and that mistake in the city’s accounting was not apparent until the city released the contracts with broadcasters this month.
KING received 58 cents per subscriber per month through the start of 2013. It, too, got a big bump in 2014, when contracts show it was paid 90 cents per subscriber per month.
• KIRO’s contract with Click states it was paid 86 cents per subscriber per month through 2013 — two cents higher than the rate suggested by the newspaper’s analysis using city estimates of payments. Contract amounts for 2014 indicate payments increased to 92 cents per subscriber.
• Money paid to Q13 Fox was overstated slightly, again because of city estimates in its records. The News Tribune calculated 57 cents per subscriber for 2011 and part of 2012, when Click’s invoices with the company now show it was paid 50 cents per subscriber in 2011. In 2014, the amount climbed to 78 cents per subscriber per month, contracts show.
• The newspaper’s March analysis nailed exactly the monthly fees paid to KSTW, a station owned by CBS in New York, at 21 cents per subscriber in 2013. That fee increased to 22 cents for 2014.
The fees might sound like couch change, but multiplied by the system’s 20,000 subscribers, they quickly add up to hundreds of thousands of dollars a year.
The documents released by the city this month appear to show Click paid roughly $2 million in retransmission fees to broadcasters, a little less than 10 percent of the cable system’s total programming costs of $22.4 million for 2013 and 2014.
For 2014, the cost for local stations broke down to $4.42 per month per subscriber — an expense that Click bosses say is directly passed on to subscribers.
Philip Napoli, a Rutgers University journalism and media studies professor, reviewed some of the retransmission consent agreements between Click and the broadcasters at The News Tribune’s request. In an email, he said what stood out was “the incredible rate at which the fee paid to license the content for a big 4 network affiliated station has increased over the past five-six years.”
For many years, broadcasters delivered their signals for free to cable systems. That changed in Tacoma in 2006, when broadcasters first asked Click to pay for the signals.
Tacoma’s rapidly escalating fees mirror a nationwide trend. Industry analyst SNL Kagan predicted in 2013 that broadcasters nationwide would rake in $7.64 billion by 2019. The company has since revised its 2019 estimate upward to $8.78 billion, according to Multichannel News.
A 1992 federal law allows local broadcasters to choose either to require a cable system to carry its signal or to charge a fee to carry its signal. These days, only niche stations, like those broadcast in foreign languages, tend to require a cable system to carry its station instead of charging for the signal, said Dennis Wharton, spokesman for the National Association of Broadcasters.
What broadcasters charge cable systems is a closely guarded secret in the industry. Even the Federal Communications Commission isn’t allowed to see complete retransmission agreements except under very limited circumstances, said Andrew Schwartzman, a Georgetown law professor who is on a subcommittee of the FCC.
“The FCC treats this information as highly valued trade secrets and confidential, and doesn’t just let anybody see them,” Schwartzman said.
If Click were a private company, nobody outside of Click and the broadcaster would ever know how much these fees were rising. But since Click is owned by ratepayers of Tacoma Power, it must operate more transparently.
Judy Endejan, an attorney who represented KOMO’s former parent company, Fisher Communications, in the public records lawsuit with The News Tribune, said the Court of Appeals decision “sets a bad precedent” because now broadcasters will be reluctant to set contracts with any cable entity subject to public records laws. The worry is that broadcasters will lose money because cable systems would be able to compare rates.
“(Open records) precludes your ability to freely negotiate the conditions that each cable company brings,” Endejan said. “If it didn’t cause economic hardship, I don’t know why these broadcasters would go to such serious efforts to protect them as trade secrets.”
But Schwartzman said there are only a few, small television markets where disclosure of retransmission consent agreements might financially harm a broadcaster.
“As a general rule I think the information should be widely available,” Schwartzman said. “It would shift the balance so the cable operator would have an unfair advantage instead of the situation where the broadcasters have the unfair advantage.”
Last year, Tacoma Public Utilities Director Bill Gaines said if The News Tribune published its analysis of how much Click was paying stations, broadcasters might not renew their contracts, which expired in December.
But the threat of public disclosure apparently didn’t stop broadcasters from signing new, three-year agreements at the end of last month.
Click general manager Tenzin Gyaltsen won’t say by how much the new retransmission fees increased or what else might have changed about the agreements. But last year’s estimate by TPU that Click rates would have to rise 10 percent in each 2015 and 2016 might not hold.
“Costs are going up at a higher rate than the 10 percent that we’ve done in the past,” Gyaltsen said.
The News Tribune requested copies of the new contracts. The city has agreed to release them by Jan. 30 if broadcasters don’t object in court. So far, none has.