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a snore for ad buyers
Ditto for must-carry rule for local station signals
By Elizabeth White
The pending merger of EchoStar and DirecTV is capturing headlines, and not just because of the size of the deal, which would bring together the nation's dominant satellite broadcasters.
The deal is also raising fundamental regulatory issues for Congress, the Federal Communications Commission and the Federal Trade Commission. Even in the current deregulatory environment, the deal is facing stiff resistance because of the near-total satellite monopoly it would create.
For advertisers, though, the merger is all but a non-issue.
Media buyers see several notable benefits to the rise of satellite.
Kevin Coyne, executive vice president and director of media at Bates North America, sums up satellite's benefits quite handily.
"On the one hand, it’s another distribution outlet. On the other hand, the profile of homes that it reaches is very appealing to advertisers. It’s a very targeted, more affluent group. It also provides competition to cable operators."
Satellite is also expanding the overall viewing population by providing TV service to homes in regions of the country, mostly rural, that cable doesn't serve.
But those benefits are already largely in place, and they will only increase as satellite continues to spread to more and more homes.
And that is unlikely to be affected by a merger of EchoStar and DirecTV.
It's indeed arguable whether the merged entity would prove more competitive with cable, for example, or necessarily speed up the growth in the number of homes with satellite service.
Similarly, advertisers will see little direct benefit from the so-called must-carry rule, upheld by a federal appeals court last week, that requires satellite providers to carry all local stations in a market or none.
The two-year-old rule stems from the Satellite Home Viewer Improvement Act, which was passed by Congress to make satellite more competitive with cable by giving operators the right to include local stations in their offerings to subscribers.
The must-carry rule is set to take effect on Jan. 1.
The rule can be expected to increase the number of satellite subscribers, a benefit to advertisers, and it will expand the audience of viewers seeing ads airing on local stations.
But because the satellite carrier will be delivering the entire local signal, there will be no opportunity for insertions of ads within those rebroadcasts.
"If there aren’t any local insertions, then there isn’t much opportunity for advertisers to capitalize on the must-carry rule," observes Bates' Coyne.
The biggest impact of the must-carry rule will be on the satellite companies themselves.
With 1,500 local broadcast stations and 210 television markets, satellite TV companies will have to pick and choose the markets for which it's worth carrying local stations.
The companies currently offer about four local stations per market, in 41 markets for DirecTV and 37 markets for EchoStar.
When the must-carry rule goes into effect on Jan. 1, both services will have to carry 20 local stations per market for major markets like Los Angeles and New York, if they want to continue offering any local stations in those markets.
That means that local stations in smaller markets may be dropped to make room for the larger markets, unless satellite technology improves or the services launch more satellites to expand capacity, as DirecTV did last month and EchoStar plans to do next year. Each satellite launch costs around $250 million.
"Fifty percent of our customers opt to get their local channels via satellite," says a spokesperson for the Satellite Broadcasting and Communications Association. "But if we carry 23 stations in L.A., it prevents us from carrying local stations elsewhere, say in Richmond."
December 12, 2001 © 2001 Media Life
-Elizabeth White is a staff writer for Media Life.
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