Washington Post 2014 Annual Report Download - page 34

Revenue from broadcasting operations is derived primarily from the sale of advertising time to local, regional and national
advertisers. In 2014, advertising revenue accounted for 81% of the total for GMG’s operations. Advertising revenue is
sensitive to a number of factors, some specific to a particular station or market and others more general in nature. These
factors include a station’s audience share and market ranking; seasonal fluctuations in demand for air time; annual or
biannual events, such as sporting events and political elections; and broader economic trends among others.
Regulation of Broadcasting and Related Matters
GMG’s television broadcasting operations are subject to the jurisdiction of the FCC under the Communications Act. Each
GMG television station holds an FCC license that is renewable upon application for an eight-year period.
Digital Television (DTV) and Spectrum Issues. Each GMG station (and each full-power television station nationwide) now
broadcasts only in digital format, which allows transmission of HDTV programming, multiple channels of standard-definition
television programming (multicasting) and subchannels of programming designed for reception by mobile devices (mobile DTV).
Television stations may receive interference from a variety of sources, including interference from other broadcast stations
that is below a threshold established by the FCC. That interference could limit viewers’ ability to receive television stations’
signals. The amount of interference to stations could increase in the future because of the FCC’s decision to allow
electronic devices, known as “white space” devices, to operate in the television frequency band on an unlicensed basis
on channels not used by nearby television stations.
Congress has authorized reallocation of spectrum for use by wireless broadband providers, including substantial amounts of
spectrum currently in the television broadcast band. Congress has authorized incentive auctions whereby the FCC would
auction spectrum relinquished by broadcast television stations in exchange for a share of the auction revenues. The FCC has
adopted rules, and is expected to continue adopting rules, addressing, among other things, how the incentive auction process
will work and how the FCC will conduct a “repacking,” whereby the FCC will require certain stations to move to new channel
allotments so as to free up a nationwide block of spectrum for wireless broadband use. The repacking and incentive auction
processes are subject to certain requirements established by Congress in legislation enacted in February 2012. Certain
aspects of the repacking rules have been appealed. The Company cannot predict the outcome of this appeal. The repacking
and incentive auction processes could have adverse effects on the Company. For example, a repacking could result in GMG
stations having smaller service areas and/or receiving more interference than they do currently. Stations moving to new
channels also could incur significant expense. The legislation requires that stations be compensated for the expenses of moving
to a new channel from spectrum auction proceeds, from a $1.75 billion reimbursement fund. The Company cannot predict
what effect a repacking will have on the GMG stations’ coverage or whether the GMG stations will be fully compensated for
expenses that they incur in connection with a repacking.
Carriage of Local Broadcast Signals. The Communications Act and the FCC rules allow a commercial television
broadcast station, under certain circumstances, to insist on mandatory carriage of its signal on cable systems serving the
station’s market area (must carry). Alternatively, stations may elect, at three-year intervals, to forego must-carry rights and
allow their signals to be carried by cable systems only pursuant to a “retransmission consent” agreement. Commercial
television stations also may elect either mandatory carriage or retransmission consent with respect to the carriage of their
signals on DBS systems that choose to provide “local-into-local” service (i.e., to distribute the signals of local television
stations to viewers in the local market area).
Stations that elect retransmission consent may negotiate for compensation from cable or DBS systems in exchange for the
right to carry their signals. Each of GMG’s television stations is being carried on all of the major cable and DBS systems
serving each station’s respective local market, pursuant to retransmission consent agreements.
In March 2011, the FCC initiated a rulemaking seeking comments on changes to the FCC’s retransmission consent and
exclusivity rules, many of which had been proposed by cable and DBS operators, such as authorization for “interim
carriage” of a broadcaster’s signal by cable and DBS operators after the broadcaster’s grant of retransmission consent has
expired. Broadcasters opposed many of the proposed rule changes. In March 2014, the FCC adopted a rule prohibiting
certain practices in the negotiation of retransmission consent agreements and seeking additional comments on possible
changes to the exclusivity rules. In the STELA Reauthorization Act (STELAR), enacted in December 2014, Congress directed
the FCC to undertake additional rulemakings concerning retransmission consent issues. Further changes to the retransmission
consent and/or exclusivity rules could materially affect the GMG stations’ (and Cable ONE’s cable systems’) bargaining
leverage in future retransmission consent negotiations, and the Company cannot predict the net effect that such an order
would have. Congress may also pass additional legislation that would affect the must-carry/retransmission consent regime.
Under STELAR, the statutory copyright license for satellite carriage of distant broadcast television signals was extended
through December 31, 2019. The Company cannot predict whether this distant signal copyright will be extended again,
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