As I write this article, DIRECTV is currently feuding with Nexstar Media Group. The contract between the two has expired, and just like the last two times, they failed to come to any sort of meaningful agreement. This means that Nexstar has the right to ask DIRECTV to take down programming from Nexstar-owned stations. It’s likely that the dispute will last all summer, as it has in the past. But is that even legal? If it is, should it be?
Who is Nexstar, anyway?
This article isn’t really about Nexstar, but let’s take a minute and explain how companies like Nexstar control a lot more than you think they do.
There was a time when no company was legally allowed to own more than five TV stations, period. It was thought that if you had big media companies that owned tons of stations, this could allow them to control the news cycle in an unfair way. (That may have been true, in retrospect.) However, those rules went away generations ago. With the coming of cable TV and the internet, the folks in government felt that it was safe to let a company own as many TV stations as it wanted.
So, some really big companies started forming. Nexstar is one of them, owning almost 200 TV stations across the country. Sinclair Broadcast Group owns a similar number of stations as well. There’s a Nexstar-owned station in about 50% of the TV markets in the US, and about 70% of the population has a Nexstar-owned station near them. When you combine the reach of the top 5 broadcast groups, they have the potential to reach nearly 100% of the country. Yet most folks have never heard of them. These big companies have more influence and larger holdings than ABC/Disney, CBS/Paramount, NBC/Comcast, or Fox. As was once said about another large US company, when they sneeze the entire country catches cold.
Why do channel blackouts happen?
They happen because they can. Simple as that. The rules for local station carriage say that a station has two choices when dealing with a pay-TV company. They can unconditionally demand that the channel be carried, but then the pay-TV company can carry it for free. Or, they can negotiate a price with the pay-TV company. You can guess which choice most station owners make.
Traditionally, station owners make three year contracts with pay-TV companies. Renegotiating every three years gives both sides the chance to respond to market changes. For example, when streaming came in, a lot of things needed to be renegotiated and station owners got richer. Now, with local channel ratings going down and pay-TV numbers shrinking, pay-TV companies want to pay less.
When the two sides can’t come to an agreement, the contract expires. The station owner could let the pay-TV company continue under the terms of the expired contract. This happens all the time and you don’t hear about it. But when it doesn’t happen, the station owners tell the pay-TV company that they must black out those stations. So it’s the station owners who are to blame when something is blacked out.
Why is this legal?
It’s legal for two reasons. First of all, we are a capitalist society. Companies have the right to negotiate for products and services in good faith. They also have the right to stop doing business with each other if they want. These things are key to our way of life, and there are few people who would dispute that.
The only time when this kind of negotiation isn’t allowed is if it poses a significant hazard to the people as a whole. For example, if police officers were allowed to walk off the job en mass, things would get very bad very quickly. If the consortium that runs the back end of the internet were to stop dealing with a service provider like Comcast, millions of people would lose vital communication. I think most folks agree there are times when we can’t just let the power of the free market run wild.
However, in a lot of cases, and TV channel contracts are one of them, there’s a middle ground. It’s the point where yes, a lot of people are inconvenienced but their lives aren’t threatened. The US government, through the FCC, has traditionally not gotten involved in this sort of thing. And perhaps they shouldn’t. Perhaps they should. That’s not for me to say. All I can tell you is that they don’t. The US Government doesn’t feel that you have a fundamental right to watch Chicago Fire and they’re not going to step in to protect you just because you can’t watch it.
How can we do better?
About a decade ago, which was a very different time politically, there was some talk about the FCC creating a rule that if a contract wasn’t reached between local channel owners and pay-TV companies, the previous contract would have to stay in force and binding arbitration would have to start. In other words, a third party would decide the terms of a new contract. None of that happened. Overall, the FCC felt that given all the new streaming opportunities, you weren’t at risk of losing access to local news and important information just because a station owner wasn’t willing to play ball.
That rule change might have been a bad idea, but it doesn’t mean that all rule changes are a bad idea. The FCC could set more reasonable rules that kept the parties talking and lessened the possibility of blackouts. They could put rules in place that meant that blackouts which affect millions of people could only go on for a certain time until the parties had to enter arbitration.
We’re not going to make any changes any time soon
Unfortunately, we’re not going to see any change in that area, probably not in this election cycle. The FCC, which has been composed of five commissioners for its nearly 100-year history, has been without a fifth commissioner since 2021. And, if I had to guess, that’s not likely to change until 2025.
The commission is traditionally composed of two Democrats and two Republicans, with the chairperson being of the same party as the President. (The FCC is part of the Executive Branch, in case that wasn’t clear.) Traditionally, when a new President is of a different party from the previous one, the FCC chair resigns and a new commissioner is nominated.
However, when the Congress is controlled by a different party from that of the President, the confirmation process can slow or stall. However, there has never before been a case where the commission has been without a full staff this long.
Without a full set of five commissioners, there’s going to be a tie on anything that is in any way controversial. And that means nothing will get done. Until there’s a 3-2 majority, there’s no hope of anything good or bad being done. That’s slowed down a lot of what needs to be done. It’s had impacts on the next generation of TV technology, and on the growth of broadband in the country.
So…
Legal or not, ethical or not, the current system which has about two-thirds of DIRECTV’s user base missing one channel isn’t going to change anytime soon. That’s the bad news. The good news is that these disputes seem to “magically” fix themselves about three days before it becomes a real problem. So here’s what to expect:
The NFL Kickoff Game this year is September 7. Why is this important? Some of Nexstar’s channels are CBS stations. CBS carries NFL football in many markets. If the dispute weren’t settled by then, a lot of people would be very upset. And that’s why it will all be solved.
