In an affidavit filed Sept. 24 in New York state Supreme Court, Reese Schonfeld charges HGTV deliberately scheduled national commercials in time slots where those ads would be pre-empted in many homes by local spots.
Mr. Schonfeld, the founding president and former CEO of HGTV sibling Television Food Network, is now president of Pacesetter Communications. Pacesetter is a co-owner along with Scripps Howard, Tribune Co., MediaOne Group and others of the Television Food Network. Mr. Schonfeld, also the founding president and former ceo of CNN, ran Television Food Network from 1993 to 1995.
In the affidavit, Mr. Schonfeld alleges: "The fraudulent conduct of the HGTV traffic department consists of scheduling advertising spots paid for by national advertisers in slots that have already been sold to local cable system operators. HGTV knows that these slots will be pre-empted, or 'covered,' by local advertising inserted by local cable operators, thus depriving the national advertisers of at least 50% of their expected audience."
VICTIMS NOT NAMED
The affidavit didn't name specific advertisers that might have been victims of the practice. Neither Mr. Schonfeld nor HGTV executives responded to Advertising Age by press time.
"If the allegations are true, this is a big black eye for cable in general," said Howard Nass, senior VP-director of local broadcast for TN Media, New York.
The affidavit was filed in conjunction with a petition from Pacesetter for a temporary restraining order, preliminary injunction and expedited discovery against Scripps Howard Broadcasting Co., Scripps Senior VP Frank Gardner and HGTV President-CEO Kenneth W. Lowe. Cincinnati-based Scripps Howard is the owner of HGTV.
Pacesetter's concern, according to the petition, is that Scripps Howard will implement the same allegedly fraudulent ad scheme at Television Food Network. The cable channel's traffic department is in the process of a move from New York to Knoxville, Tenn., where it will be consolidated with HGTV's traffic department.
Mr. Schonfeld, in his affidavit, claimed Pacesetter "gathered independent evidence of Scripps' fraudulent double selling of advertising at HGTV by videotaping HGTV's national programming. By comparing those tapes to tapes of HGTV programming delivered on the same dates and times by local cable systems, I have ascertained that HGTV has placed national ads in local avail slots because I have seen the local cable systems covering the national ads with local ads."
According to the affidavit, when Mr. Schonfeld presented his allegations to Scripps Howard, Mr. Lowe responded that "Scripps has done and will do nothing improper in selling national advertising spots for TVFN (or HGTV for that matter . . . )."
But Mr. Schonfeld went on to claim in the affidavit: "I have been informed by witnesses to the events (who are willing to provide corroborating testimony) that Scripps' attempt to implement its fraudulent scheme at TVFN occurred as follows: When the HGTV employees were in TVFN's traffic department in New York in June or July, they attempted to schedule national ads for the 'local avails,' although they knew that many local cable operators would 'cover' the national ads with local ads . . . When TVFN's employees protested and prevented the implementation of this practice, the HGTV employees reported that this was a common procedure in HGTV's traffic department in Knoxville."
It's a common practice among cable networks to schedule local program promotions or direct response ads, with the marketer's permission, in slots where some operators sell local spots.
The affidavit also cites a settlement earlier this year between ABC and Scripps Howard for $3 million after the latter was accused of improperly substituting local promos for ABC promos on Scripps' six ABC affiliates. That settlement was