Wednesday, October 13, 2010

Cablevision Fox Negotiations Are Why Comcast and NBC Shouldn't Merge

In three days, Cablevision customers will either still be enjoying their Fox broadcast channel and cable nets or will find static. Just in time for MLB baseball on Fox. The ultimate loser in the negotiation is the consumer. No signal, no programming, higher license fees, higher pass through costs on the cable bill. Bad for all, but even worse, bad for Comcast and NBC.

Assuming the merger went through, how could Comcast prepare to drop a broadcast channel like Cablevision is threatening. Won't cries of unfair trade be screamed from door to door and across the legal system. Can real negotiation occur? How else can Comcast be assured they are getting the best deal? Too much pressure not to be seen as monopolistic.

The solution of having the government negotiate carriage deals for Comcast seems absurd. The government can't negotiate their own deals without overruns, misspending, and other bureaucratic bungling. Owning a major broadcast entity seems ripe for bigger problems then Comcast needs.

And what about the other side of the business, Universal Studios. As cable operators fight for shorter windows to get movies from theaters into homes ASAP, is Universal's best interest being considered. And doesn't this vertical ownership from creation to distribution remind anyone of the days when studios owned the theaters. Back then, the concern was that smaller theaters would get squeezed out of films because they weren't owned directly by the studio. For a while, laws were enacted to protect theaters from this monopolistic activity. Doesn't this merger have a similar smell?

So Cablevision and Fox will fight to the finish. Most likely, a deal WILL NOT get done till after the networks are off the air. It happened with ABC, It happened with Scripps. It seems likely it will happen again with Fox. Call it squeezing any last drop out of the negotiation, call it acrimonious. But it is now the SOP, standard operating procedure for negotiation between content and distribution. And it is the biggest issue facing the Comcast NBC Universal merger as well.

1 comment:

  1. The problem is that "must carry" requires cable to renegotiate deals with the broadcast nets on a regular basis.

    Here's a fair solution.

    Let's say we calculate a cable company's subscriber base as having a number of household viewership hours (total # of households * average # of TV hours watched per week per household). Then we set the regional value of a household at $2.50 a week.

    The $2.50 per week is a maximum based on a model that weighs the number of hours households spend watching broadcast channels vs. basic cable or IPTV (like Hulu and Netflix). So if broadcast's share drops in a market, so does the compensation pot.

    A Cable provider puts the $2.50 per household subscribed into a fund. And then that fund is divided up among broadcasters based on their share of the broadcast ratings for the week. This is daytime, primetime, overnight, etc.

    All non-broadcast channels (like Bravo, Comedy Central, TBS) have to be sold to providers as separate contracts where the networks can't bundle them into the licensing agreements for their terrestrial signals.