Signals for one of the nation’s biggest local broadcasters went dark on satellite TV distributor Dish Network Corp. on Tuesday, the result of a dispute over a new distribution contract.
Dish and Sinclair Broadcast Group Inc. have been negotiating a contract that covers more than 150 local television stations owned or managed by Sinclair that reach more than five million customers in 79 markets. The signals were pulled from Dish after efforts to sign a new agreement or extend the existing one failed.
Besides owning 121 TV stations, Sinclair also manages 32 through partnerships. Of the 153 stations, 87 are affiliates of the four major broadcast networks— CBS, NBC, ABC and Fox—meaning customers lost access to local and national news programming as well as sports carried by those stations.
Dish said 129 stations in 36 states and the District of Columbia had been pulled from its service. An additional 23 stations that Sinclair negotiates distribution agreements for remain on Dish.
In a statement, Dish said it had come to terms with Sinclair on fees to carry its TV stations but the broadcaster was holding out to try to leverage distribution for a cable channel it does not yet own. Dish declined to provide details, but Sinclair has expressed interest in starting its own cable network focused on high school and college sports
“Sinclair rejected our extension offer and has chosen to use innocent consumers as pawns to gain leverage for the economic benefit of Sinclair, while causing substantial harm and disruption to the lives of consumers,” said Warren Schlichting, Dish’s senior vice president of programming.
Sinclair General Counsel Barry Faber confirmed the broadcaster’s signals were out of Dish homes but declined further comment.
Negotiations between Dish and Sinclair got ugly two weeks ago when the satellite broadcaster filed a complaint at the Federal Communications Commission that accused Sinclair of failing to negotiate in good faith on the retransmission contract. Furthermore, Dish said Sinclair was violating FCC rules by forcing Dish to negotiate with them for stations they don’t technically own. The two companies agreed to a short-term contract extension at the time.
Last March, the FCC passed new rules prohibiting a broadcaster from negotiating on behalf of a station it doesn’t own but rather operates through a so-called joint sales agreement. Many broadcasters operate more than one station in a particular market through such pacts. Broadcasters say it allows for cost-savings and the ability to produce more local content. But program suppliers and pay-TV distributors have often argued that joint sales agreements give a local broadcaster too much leverage in contract negotiations.
“Dish explicitly requested `Sinclair stop coordinating negotiations or negotiating on a joint basis’ for the stations in Sinclair’s proposal that Sinclair does not have de jure control over,” Dish said in its complaint two weeks ago.
Sinclair countered that it “disagrees with your legal conclusion that we have offered to negotiate on behalf of any stations with respect to which we do not have ‘de jure’ control,” according to an email from Sinclair that Dish attached to the complaint. Sinclair said the stations in question are grandfathered from the new regulations.
The blackout comes at a tough time for Dish, which has been losing subscribers from consumers cutting the cord in favor of lower-cost Internet alternatives. In its second-quarter report earlier this month, Dish said it lost 81,000 pay-TV customers, compared with a loss of 44,000 a year earlier.
Before the current dispute, Dish had been involved in 32 of the 74 retransmission consent disputes that have resulted in TV blackouts since January 2012, according to the National Association of Broadcasters.
Sinclair, in an earnings call earlier this month, noted that the retransmission rights for 75% of its subscriber base were up for renewal over the next 12 months, giving the company an opportunity to reset the fees it receives under those deals.