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Cablevision v. Viacom Could Be A Game Changer

Cablevision v. ViacomViacom might not own any sports channels in your cable package, but its business practices might end up impacting the companies that do.

Last February, Cablevision, the 8th-largest cable TV provider in the U.S., filed an antitrust lawsuit against Viacom, claiming that the owner of Comedy Central, Nickelodeon, and MTV coerced Cablevision into carrying 14 low-rated “Suite” TV channels by charging a much higher price to carry its eight “Core” channels by themselves than for the Core and Suite programs combined. Reportedly, this amounted to a $1 billion penalty for dropping the Suite channelsCablevision claims that this is a violation of the Sherman Antitrust Act, because Viacom is forcing Cablevision to block out competition by paying for channels that customers don’t want.

At the heart of this issue, of course, is bundling, something I wrote about extensively in this post. Most media companies with skin in the pay TV game have multiple channels spanning multiple genres — news, sports, entertainment, documentary, the dreaded “reality TV”, etc. — and they regularly use all of those channels as leverage to charge pay TV service providers higher rates. Cable companies like to argue that this is why your cable bill keeps going up.

Make no mistake, though — this case is less about why cable costs are skyrocketing than it is about who has control over bundling — either the media companies or the cable companies.

Cablevision CEO James Dolan is on the record as saying:

“Retail bundling has been going on for quite some time. [Cablevision founder] Charles Dolan was one of the first to ever do it. It was really designed to provide more value to the customer by giving them a lot more product at a better price.”

Dolan’s objection here is not with retail bundling, but with wholesale bundling, which allows media giants to take up “shelf space” on your cable and satellite TV dial and block competitors’ channels in the process. Dolan is hoping this case will give the leverage back to Cablevision and other TV service providers. (Never mind that AMC Networks, once a Cablevision subsidiary, has pulled this same stunt before.)

While a Cablevision victory will likely spell the end for a lot of channels you probably don’t watch anyway and could allow newer media companies to enter the market, don’t count on it launching a new era in a la carte cable. At best, we might see pay TV providers start offering different types of bundles on the retail level. The closest we’ll ever get to a la carte cable are genre-specific bundles — 20 channels for sports, 20 news and information, 20 for entertainment, etc. — with growing discounts for adding more bundles.

Even that would be a big win for consumers, though, as sports fans could get just the channels they want and use online services to fill in the rest, while non-sports fans can dump the most expensive channels on their service. On the other hand, it would be a massive blow to Disney’s bottom line if even 10 million non-sports fans were suddenly able to drop ESPN. 10 million lost subscribers would amount to $732.3 million in vanishing profits, based merely on 2013 subscriber fees, which will not remain static for long.

Keep an eye on Cablevision v. Viacom, folks. This could be a massive game changer.

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