In Fight Against Viacom, I’m For Cablevision

Some believe that Cablevision is simply playing politics or PR with its antitrust lawsuit against Viacom, which alleges that Viacom engaged in illegal “block booking” or tying arrangements in negotiating its latest carriage contract.

“Viacom effectively forces Cablevision customers to pay for and receive little-watched channels [like Palladia and MTV Hits] in order to get the channels that they actually want [like Comedy Central and MTV],” Cablevision said. “Viacom’s abuse of its market power is not only illegal, but also prevents Cablevision from delivering the programming that its customers want and that competes with Viacom’s less popular channels.”

Like other cable and satellite operators, Cablevision is under pressure to do something about rising cable rates and the lawsuit publicly pins the blame on a programmer and shows that Cablevision is, by golly, doing something about it.

This cynical view is reinforced by a 2011 Ninth Circuit federal appeals court ruling that suggests that the tying argument doesn’t hold a lot of weight.

Then again, the cynics may be wrong. Cablevision may really feel it is the victim of anticompetitive behavior and have real evidence it was bullied into buying those second- and third-string channels in the Viacom stable.

Whatever the motivation, broadcasters should be rooting for Cablevision to prevail — that is, broadcasters who are not Disney, Fox and NBCU. Those three may be a little ambivalent (and a little nervous) since they are in the same business as Viacom.  Each hawks a bunch of TV channels, some of which operators need and others they would happily do without.

To a certain extent, network distribution is a zero sum game. The operators can no longer pass along each increase in programming cost to their subscribers. Cord shaving and cutting are real. If the monthly cable bill becomes too much, subscribers will downgrade their cable service or drop it altogether.

That means that if operators are going to meet the rising demands of broadcasters for retrans fees, they are going to have to trim programming costs elsewhere, and little-watched cable networks are a good place to start.

In other words, if they are going to pay quarters and dollars to the local Big Four affiliates, they have to stop paying nickels and dimes to the likes of Nicktoons and MTV Jams. (As always when we are talking about programming fees, we’re talking per subscriber, per month.)

So, a Cablevision win in its lawsuit would free it up to put its money where its subscribers’ viewership is — major cable networks and local TV stations. A win would also have the ripple effect of freeing up other operators, some of which hurried out statements last week in support of Cablevision and its assault on Viacom.

Of course, if Cablevision really wanted to do something about its programming costs and basic cable rates it would not be going after Viacom, which one cable exec described to me as a “soft target.”

It would be going after ESPN and the regional cable networks. They’re the ones that are putting the real upward pressure on costs and rates. Even the biggest cable operators are now paying more than $5 for the ESPN package of networks and $2 or $3 for regional networks.

But it’s doubtful Cablevision will be picking on sports networks. The Dolans who own a controlling interest in Cablevision also own a controlling interest in MSG, the TV home of the New York Knicks and New York Rangers and a big inflator of Cablevision cable bills.

In the best of all possible worlds, operators would move ESPN and other costly sports networks off the basic tiers and onto their own pay tiers so that only subscribers interested in sports would have to pay for them. That would leave plenty of basic dollars for TV stations, still the most-watched channels.

In the real world, that is near impossible at this point because the economics of sports networks rely heavily on the widest possible distribution to maximize programming fees and advertising revenue. The sports networks are not going to give up their positions on basic tiers without a big fight.

One communications attorney pointed out to me that Cablevision could lose by winning its case. A win would put pressure on Cablevision to switch to a la carte retail marketing.

If it’s not OK for cable programmers to bundle channels in selling to the operators, he said, how can it be OK for cable operators to bundle channels in selling to subscribers

But broadcasters who are not Disney, Fox and NBCU don’t need to worry about the sports networks or the likelihood of a la carte marketing right now. They just need to sit back and cheer on Cablevision.

Harry A. Jessell is editor of TVNewsCheck. He can be contacted at 973-701-1067 or[email protected]. You can read earlier columns here.