Co-Opetition - Adam M. Brandenburger [128]
TCI’s customers were unhappy, and TCI wasn’t the only game in town. Omnivision, a local “wireless cable” operator, had paid for retransmission consent from all three affiliates. The stations were off TCI, but they were still on Omnivision. As a result, customers started flocking to Omnivision—over two thousand in the first two weeks alone.
TCI decided to play hardball. It found an opportunity in nearby Beaumont, Texas, where McKinnon, owner of KIII in Corpus Christi, was in a more vulnerable position. In Beaumont, McKinnon owned the local ABC affiliate, KBMT. The other two Beaumont affiliates had given retransmission consent for free, and since McKinnon couldn’t afford to be the only one off-cable, he, too, offered TCI his Beaumont signal for free. He was in for a surprise. TCI turned him down.
TCI linked the game in Corpus Christi to the one in Beaumont: if McKinnon wanted to get KBMT back on-cable in Beaumont, then his KIII in Corpus Christi would have to stop holding out. As McKinnon explained: “We were ready to give them consent in Beaumont, but [TCI Senior Vice-President Robert] Thompson said in a press conference that they were holding KBMT hostage for Corpus Christi.”19 A TCI spokesman confirmed that this was indeed their game plan: “If [McKinnon] gets his way in Beaumont, he’ll get it elsewhere as well.”20
McKinnon was in an impossible position. Being off-cable in Corpus Christi was a problem, but the other two network affiliates were off, too, so at least he wasn’t losing viewers to them. In Beaumont, though, he was the only one off-cable, and his viewers were switching to the rival networks.
Kennedy and Smith, McKinnon’s fellow broadcasters in Corpus Christi, understood TCI’s tactic and recognized that McKinnon’s problem was their problem, too. It wasn’t in their interest to have McKinnon over a barrel in Beaumont. If TCI could get him to give away consent in Corpus Christi, then their bargaining position would be seriously compromised. So Kennedy and Smith came up with their own linkage. They refused to discuss any TCI proposals in Corpus Christi until McKinnon was back on-cable in Beaumont. “They are holding [KBMT] hostage. We can’t do much until they put them back on the air,” commented Smith.21 The tactic worked: McKinnon was put back on-cable in Beaumont, and the link between the Beaumont and Corpus Christi games was severed.
Although TCI accepted that it would have to pay something to the broadcasters in Corpus Christi, it still worried about setting a precedent. TCI didn’t want to create the perception that it was willing to pay for retransmission consent elsewhere. It didn’t want any future negotiations to be linked to what happened in Corpus Christi.
Smith suggested there might be room for TCI to be creative. As he put it: “I don’t give a damn who gets the money, but if they have my [KRIS] signal on cable, somebody is going to get paid for it.”22 That somebody turned out to be the Corpus Christi campus of Texas A&M University, to which TCI donated an undisclosed amount of scholarship money. In return, the three broadcasters gave TCI retransmission consent.23 TCI’s oblique method of paying in Corpus Christi managed to preserve some uncertainty over whether it would really pay for retransmission consent elsewhere.
Some games could be quite naturally linked but are better left unlinked. The following disguised case shows that sometimes it’s better not to expand the scope of the game.
Don’t Mention It Melanie, the CEO of a large textile maker, was pleasantly surprised when one of her larger customers called and asked to increase the size of the current year’s order. Back in January, Melanie had contracted to supply the customer over the course of the year