Peter Kafka

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Billions! Cablevision Takes Its Second Swing at Viacom in Bundling-Breaking Fight.

dr. evil
Here’s the next step in the Cablevision/Viacom cable bundling fee fight: After back and forth between the two companies about which stuff they want to keep private, they have released a public version of Cablevision’s legal complaint.

Scintillating, right?

This isn’t the equivalent of the Viacom/Google data dump, where people like me got to wallow in all kinds of juicy notes, emails and spreadsheets that had previously been private.

Instead, this is just a more formalized version of the argument Cablevision made last week, when it said Viacom had illegally forced it to take lots of crappy Viacom channels in order to get the ones it really wanted, like MTV and Comedy Central. You can read the whole thing, and/or peruse a highlight compilation the pay TV provider put together, at the bottom of this post.

The one really interesting part in here should be where Cablevision explains just how much more expensive it is for them to buy a handful of channels instead of taking the whole package. Their contention is that while Viacom theoretically offers its channels to distributors on an a la carte basis, it charges so much for them that there’s no practical way anyone would do that, because it’s much cheaper to take the bundle. That is, it’s a choice without a choice.

But at Viacom’s request, all the pricing information has been redacted from the complaint. So Cablevision can only say that the price difference between Viacom’s a la carte option and the bundle is something between $1 billion and $9 billion, and that that number is “more than Cablevision’s entire programming budget” for 2013.

That sounds pretty eye-popping. But without a full look at the numbers it’s hard to place that in proper context. For starters, the price difference would apply to the length of the contract, and while I think even the length of the deal may be redacted, it is almost certainly five years or more.

So whatever the price difference is, you’d need to divide it by five, or seven, or whatever, to figure out what it would actually mean to Cablevision.

Here’s what Viacom’s PR team has to say about that one, by the way:

“That figure is nothing more than rhetorical math, an inflated, irrelevant number manufactured to create artificial sticker shock. As Cablevision admits in its own filing, these numbers “do not concern actual ‘deal’ terms, but only Viacom’s initial offers” which were made at the request of Cablevision. Viacom’s ‘rate card’ prices are paid by hundreds of distributors — but never by Cablevision, which has always exploited its market clout to extract deep discounts in every contract negotiation with Viacom and every other programmer.“

Want to hear more from Viacom? Okay.

“This suit is nothing more than a hypocritical attempt by Cablevision to void a long term carriage deal they agreed to only two months ago. Cablevision is crying foul over a standard business practice that expands choice and lowers cost for consumers – a practice they use extensively to sell their own services. Cablevision received significant discount on a package of networks that account for nearly 20% of the total viewing audience. Now they want the lower price without the obligation to offer our networks to their customers. For Cablevision it’s ‘do as we say and not as we do’ – an arrogant approach all too familiar to its customers.”

But wait! There’s more!

“Although they have lower viewership than almost all of Viacom’s smaller networks, the three bundled Cablevision-controlled MSG networks cost Cablevision customers significantly more per month than Viacom’s entire offering.”

I’ll go through the complaint itself, but my hunch is there isn’t anything more revelatory in here, or Cablevision would have already made a big deal about it. I also believe that Cablevision thinks it has much more exciting stuff to show, but isn’t wheeling it out until later in the legal process. Which could take quite a while.

Again, the big picture here: If you take Cablevision at their word, they’re trying to blow up the bundling system that pay TV has used for decades (at least when it comes to wholesale deals with programmers — Cablevision says bundling TV channels it sells to retailers is a great idea). Viacom says it’s a rate negotiation.

If this thing goes all the way through the courts and Cablevision wins, it could re-order the TV business. But that scenario is going to take an awfully long time to play out, so if you’re looking for change in the TV Industrial Complex, you’re going to have to hope for someone else to make that happen. What do you say, Netflix? Apple? Google?

Here is Cablevision’s highlight reel for the complaint:


Complaint Highlights 03.07.13


Cablevision v Viacom 13 CIV 1278 Public Redacted Complaint


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— From the fact sheet for a fake product entitled Useless Plasticbox 1.2 (an actual empty plastic box) placed in L.A.-area Best Buy stores by an artist called Plastic Jesus