Bundling Debate Puts Viacom In Crosshairs

Cablevision Suit Charges Program Distributor Forces It To Carry Lower-Rated Networks

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As tension between cable providers and program distributors crackles over content costs, one company is emerging as the lightning rod: Viacom.

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Cablevision last week sued the distributor of MTV, Comedy Central and Nickelodeon, alleging Viacom is forcing the cable operator to carry and pay for 14 lower-rated networks such as Palladia. And this seems to be the first of several fights brewing for Viacom.

"When a distributor decides to take a stand [or] pick a fight, Viacom is the obvious target," said Bernstein Research analyst Todd Juenger. "Viacom is in the weakest position of all the network groups in terms of ratings and brand health. At the same time, Viacom is the most aggressive at making its content available via online sources."

In the early days of cable, operators welcomed new niche channels as a way to market services to a diverse group of customers and to boost the number of networks they carry. This gave programmers the opportunity to earn advertising dollars and carriage fees for small channels by packaging them with larger, more-established networks. But in an effort to suppress ever-increasing subscriber fees, operators are starting to fight back against bundles of networks. An exception is major live sports (something Viacom lacks), which are a big source of higher costs but considered essential by cable operators.

Media experts contend that it's time for Viacom to consolidate its programming or move some smaller networks to on-demand or online platforms.


Viacom, which split from CBS in 2006, could sure use any leverage the broadcaster would have provided right about now, one media consultant said.

Viacom also has been plagued with ratings issues. While Nick has seen some recovery as it rolls out new programming, MTV is trying to figure out how to bring in viewers post-"Jersey Shore."

In the lawsuit, Cablevision alleges that Viacom forces customers to pay for little-watched channels in order to get the ones they actually want. "The manner in which Viacom sells its programming is illegal, anti-consumer and wrong," Cablevision said in a statement.

Viacom said, "This is nothing more than a blatant attempt by Cablevision to use the courts to renegotiate the terms of a distribution deal reached only two months ago. We are fully confident in our position."

Cablevision is also garnering support from DirecTV, Charter and Time Warner Cable. Its last deals with both Time Warner Cable and Dish Network were in 2009, suggesting these agreements could be ending soon. If that's the case, a carriage renewal likely won't be easy.

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