Amid pay-TV's biggest station blackout ever, Dish handily beat Sinclair in perception

When it comes to major pay-TV blackouts, the brinksmanship always seems to come easier in the summer months, when houses using television (HUT) levels are relatively low.

Viacom pulled 17 of its cable channels off DirecTV (NYSE: T) in July 2012, keeping networks including Comedy Central, MTV and Spike TV off the program guides of more than 20 million satellite subscribers for 10 days. 

That same summer, Dish Network (NASDAQ: DISH) blacked out AMC Networks channels for its 14 million subscribers for several months. The satellite operator didn't return to the bargaining table and carve out a deal until October, when the hit AMC series The Walking Dead had its season premiere.

The dynamics of cable carriage and broadcast retransmission negotiations differ. But in blacking out its 129 broadcast affiliate stations on the program guides of around 5 million Dish Network customers this week, Sinclair might have been thinking it found a late-summer scheduling sweet spot to dig its heels in -- not yet pre-empting into any serious viewing events, but cutting it close enough to get Dish's attention.

"With NFL opening day looming, Sinclair probably believed that Dish would simply capitulate to anything it demanded at the last minute, even if it was an unrelated cable network that they do not yet own/operate," said BTIG analyst Richard Greenfield. "Unfortunately for Sinclair, the regulatory environment is different now than it has been in the past. And, they are trying to go head-to-head with Charlie Ergen, who fights hard for what he believes and is notoriously litigious. Dish did not roll over and is fighting back by filing an FCC complaint that is already getting serious attention from the highest levels of government regulators."

Indeed, it appears the blackout--which ended after 24 hours with another short-term extension--may actually be well timed for not only Ergen and Dish, but the entire pay-TV industry. 

With FCC Chairman Tom Wheeler calling an emergency Media Bureau meeting to discuss the largest station blackout in pay-TV history, Dish's impasse with Sinclair serves to highlight the pay-TV industry's concerns at a time when the FCC is reconsidering rules governing broadcast retransmission licensing negotiations. 

For its part, the National Association of Broadcasters warned the FCC earlier this week that "bad actor" operators like Dish might intentionally try to manufacture such a messaging scenario.

"The TV blackout strategy executed by Dish is deliberately timed to create hysteria and persuade the FCC to alter rules to give them a regulatory advantage," said Robert Kenny, spokesman for the NAB-backed

The NAB's campaign didn't appear to be stick, however. "Dish certainly has a better PR strategy and they have really succeeded in making Sinclair look like the bad guy," said Alan Wolk, senior analyst for The Diffusion Group. 

Greenfield even titled his blog post on the blackout, "Sinclair's Greed Could Spoil Retrans Party For the Entire Broadcast Industry."

At a time when Wheeler is seriously considering dispensing with key leverage points for broadcasters in retrans talks, Greenfield said, Sinclair is pushing too hard with its demands. 

For example, in addition to negotiating a new retransmission licensing deal with Dish for the 129 stations it fully owns, Sinclair was trying to re-negotiate retrans deals for 32 stations it either manages or co-owns. This is what Dish was complaining about on August 15, when it sent a letter to the FCC saying Sinclair wasn't negotiating in good faith. 

"We find the outright greed and arrogance of Sinclair astonishing," Greenfield said. "The lack of stringent government oversight of TV station consolidation has already allowed Sinclair to wholly own two top broadcasters in 12 markets (such as Fox and NBC in San Antonio, ABC and Fox in Dayton, and CBS and FOX in Bakersfield). Yet, Sinclair wanted to push that leverage even further by including stations it does not fully-own."

Sinclair backed off the demand after Dish filed its complaint and agreed to a 10-day extension. However, according to Dish's latest FCC complaint, the broadcast company is demanding that the satellite operator carry and pay affiliate fees for an as-yet-unnamed cable network that Sinclair either hopes to launch or acquire. 

"Tying broadcast retrans to cable network carriage has been abused for years, and the FCC clearly needs to immediately end it," Greenfield said. 

Of course, while the larger point may prove beneficial long term for the pay-TV industry, blackouts aren't good for business. Dish, for instance, is coming off successive quarters of subscriber recession, kickstarted at the beginning of the year by brief blackouts by CBS owned-and-operated stations and Fox News. The price of a PR battle over retrans could have gotten heavier if the blackout would have extended through Friday, when CBS is scheduled to show an NFL pre-season game featuring Detroit and Jacksonville in primetime. 

"That may be the reason why Sinclair is driving such a hard bargain with Dish right now -- they see a limited future and want to cash in now," Wolk said. --Daniel