TV Chief Takes 2-by-4 to a Proposed Cable Merger
By Emily Steelaug, The New York Times
- Aug. 24, 2013
MEDINA, Minn. — As the oom-pah-pah oom-pah-pah of the band fades, Patrick Gottsch makes his way through silver-haired couples circling the dance floor at “The Mollie B Polka Party” in this quiet Midwestern town.
Mr. Gottsch, the chairman of the Rural Media Group, steps under a disco ball and issues a warning.
“As you folks in rural America know, every once in a while, you’ve got to take a two-by-four and hit the mule between the ears,” he said. “That is what we want to do now with Comcast and Time Warner.”
He says Comcast’s proposed $45 billion purchase of Time Warner Cable threatens the future of his television stations, which broadcast rural-themed shows like “The Mollie B Polka Party,” “National Tractor Pulling” and “All American Cowgirl Chicks.” And he urges the dancers, numbering about a thousand, to file protests about the merger with the Federal Communications Commission, which is reviewing the deal.
“There can’t be a wall built between urban and rural America,” Mr. Gottsch says later.
Raised on a family farm in Elkhorn, Neb., Mr. Gottsch, 61, has emerged as one of the country’s most vocal critics of the proposed media consolidation, which would reshape the video and broadband landscape. His warnings about the Comcast deal, as well as AT&T’s $48.5 billion bid for DirecTV, echo a fear that some television groups have expressed about the pending mergers: The deals would create behemoths that will use their heft to push around networks, forcing them to either cut the fees they charge for their programming or risk being thrown off the air. Some executives say the consolidation would result in challenges for new networks, especially those with niche or underserved audiences, and a lack of diversity on TV.
“As media companies get bigger, there always is the sense that the East Coast, West Coast and the N.F.L. cities are very well represented,” said Amy Yong, a media analyst at Macquarie Securities. “The rest of the U.S. gets ignored sometimes.”
While few executives at larger broadcasters have publicly opposed the deals — though they complain privately — Mr. Gottsch has stirred up a dust storm. The polka party this month was his first stop on a tour of state fairs, rodeos and farmers’ conventions to rustle up opposition. In Washington, he has hired a lobbying firm and appeared before a House antitrust subcommittee, the F.C.C. and the Justice Department. His two stations, RFD-TV and Family Net, have run spots urging viewers to speak out. Of the more than 63,000 comments filed to the F.C.C. about the proposed merger, about a fifth mention RFD-TV.
Several other companies have joined Rural Media in denouncing the Comcast acquisition, which would give it control of 35 percent of the country’s broadband Internet service coverage and 16 of the country’s top 20 cable markets. Netflix, the Internet streaming business, and Dish, a satellite television provider, have urged regulators to reject the bid. And The Blaze, the conservative channel run by Glenn Beck, has collected 42,000 comments from viewers that it plans to submit to the F.C.C. before the public comment period closes on Monday, a spokesman for the network said.
Mr. Gottsch said he did not strictly oppose the Comcast-Time Warner Cable and AT&T-DirecTV deals, but he wanted conditions added to ensure that his networks and other independent channels were carried to maintain a diverse programming slate. Some critics question his motives, however, as companies often exploit mergers to negotiate better financial terms.
In a letter to Mr. Gottsch dated Aug. 15, David L. Cohen, an executive vice president at Comcast, wrote, “Your efforts to drive a wedge between Comcast and rural viewers as a means to promote your own business interests is unfair and grossly inaccurate.”
Mr. Cohen said Comcast had not abandoned rural programming and continued to carry the network in cities like Nashville and Salt Lake City. He said Mr. Gottsch’s campaign had confirmed what his company already knew: Some viewers want rural-themed programming.
“Comcast’s commitment to rural-themed programming is simply not just about you and your self-interested pecuniary interests, which now seems to be the exclusive focus of your advocacy,” Mr. Cohen wrote.
Mr. Gottsch fears he has much to lose. He dreamed up the concept of a rural-themed network in the 1980s while selling satellite dishes. In the 1990s, he put together a business plan for RFD-TV, named for the Rural Free Delivery services established in the late 19th century to deliver mail to farm families. Willie Nelson was an early supporter, contributing his library of music shows like “Pop Goes the Country.”
But after Mr. Gottsch had trouble securing financing and getting his programming picked up, he started RFD-TV as a nonprofit public interest channel. In December 2000, Dish Network became the first service to carry it. RFD-TV became a profit-making entity in 2007.
Today, the 24-hour cable network is carried by more than a half dozen cable and satellite providers, reaching about 40 million homes. Still, it attracts a relatively small audience. This year, through July, RFD-TV had an average of 137,000 viewers during prime time, according to Nielsen. In contrast, Comcast’s USA Network drew 2.3 million prime-time viewers and Time Warner’s Headline News network 335,000.
The Rural Media Group, which is based in Omaha, also includes a satellite radio station and a magazine. It is profitable and on track to make about $40 million in revenue this year, Mr. Gottsch said. Its flagship, RFD-TV, features 6.5 hours of rural news a day and a mix of agriculture, equine, rural lifestyle and entertainment programming. Like other TV companies, it makes money two ways: through fees from the providers that carry its programming and by selling ads. The more homes a network is in, the bigger the potential audience for advertisers, and the more money for the network.
Fewer homes probably mean less money, and the mergers have Mr. Gottsch worried about his company’s fate. A warning sign came last year when Comcast pulled the network off the air in Colorado and New Mexico. RFD-TV’s contract with Time Warner Cable has expired. DirecTV does not offer Family Net, and AT&T’s U-verse has not had an agreement to carry RFD-TV, though it does carry Family Net.
“Once we gain approval to acquire DirecTV, which has nationwide reach, and with our significant rural broadband expansion that the merger makes possible, we expect content that’s focused on rural customers will have greater appeal,” Fletcher Cook, an AT&T spokesman, said in a statement.
The brouhaha over rural programming has attracted the attention of both Republican and Democratic legislators. Senator Amy Klobuchar, Democrat of Minnesota, said in a statement, “We need to make sure families have access to a diverse range of content, including rural-focused programming that’s important to millions of people in Minnesota and all across the country.”
At the polka party, Mr. Gottsch’s jeremiad had fans concerned that his stations would disappear from the airwaves.
“If they take him off, we are going to throw the TV out,” said Alfons Speidel, 75, of Goshen, Ind., between dances.
Eileen Tlusty, 73, of Protivin, Iowa, said, “I can’t live without it.” She added: “What am I going to watch? Dating in the nude?”