Tuesday, June 24, 2014

Cable's Dirty Little Word...Leverage

For cable networks, the key to launch multiple channels is to let the most valuable channel help drive the launch of the smaller less desirable ones.  But don't dare say that the networks employed leverage to force the cable operator to negotiate an all or nothing approach to launch the stable of channels.  In the Viacom - Cablevision lawsuit, leverage is precisely what is being argued. And the courts have agreed to hear the case.  "Should the suit continue, and be decided in Cablevision’s favor, it would set a precedent restricting the ability of programmers to force MVPDs to accept bundles of ancillary – and usually unwanted – content in order to get access to premium channels." 

Historically, though always denied, this has been the case.  For Viacom, it has helped to launch offshoots like VH1 Classics and for Discovery, launches of Health and OWN.  Deals are constructed that bundle in such a way that better deals are constructed for line-up access.  What is ironic is that Cablevision once had its share of cable networks before spinning them off into separately traded public companies.  MSG and Fuse (which was just sold to NuvoTV) was once paired with AMC, Bravo (now an NBCU brand), IFC, Sundance, and WE.  Aggregating these brands enabled all to grow and prosper.  And while the leverage word is never used, the value of the bundle was certainly superior to a la carte when license fees were negotiated.

Not surprisingly, it is also the case on the cable operator side.  Networks are packaged together and offered to consumers; like the lawsuit, households do not have the option to subscribe to basic channels a la carte from their cable provider.  It is in essence the same issue that Cablevision is now suing Viacom over.  Ironic, indeed.  Should Cablevision prove victorious in this lawsuit against Viacom, it could open up a new set of lawsuits with consumers requiring cable operators to sell channels a la carte as well.  Perhaps Cablevision should be careful what they wish for. 

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