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AT&T ejects Scripps from U-Verse

Negotiations break down over video use

U-verse, AT&T’s broadband service, dropped all Scripps Networks offerings from its lineup at 1 a.m. EDT on Friday as a result of stalled negotiations over video rights. U-verse, which has about 2.7 million customers, until Thursday carried HGTV, DIY Network, Food, Cooking Channel and Great American Country.

Scripps topper John Lansing said that the net had ironed out carriage fees with AT&T in advance of last month’s contract deadline and that he was surprised by the decision to pull the plug, which he says came from AT&T. AT&T has continued to carry the network on an extension-by-extension basis and Thursday decided not to extend the negotiations any further.

“Right at the end of the negotiation, there was a significant ask on the part of AT&T for the rights to all video on all platforms,” Lansing said. “They wanted mobile, websites, iPad, as well as platforms that haven’t been developed yet.”

AT&T said that Scripps was demanding twice what Scripps receives from U-verse’s competitors, and that the rate increase would put unfair pressure on AT&T to raise subscription rates.

“We really worked with them on the rate to get them what they wanted,” said Lansing. “They’re not ComCast or DirecTV – their rate is different.”

The issue of video rights rarely arises during carriage negotiations because Scripps’ is atypical from most congloms when it comes to video production. All Scripps video content is produced in-house, rather than being farmed out to smaller production companies and then leased back to the networks that broadcast it – meaning that Scripps, unlike, say, CBS, controls all the rights to all the video it transmits.

This isn’t the first battle between Scripps and a cable provider this year – in January, the conglom went to the mattresses over sub fees with Cablevision Systems in New York (just fresh from its own bout of fee negotiations with News Corp). In that case, Scripps subsequently commanded a much greater increase in sub fees than even its own internal analysts had projected.

Scripps may be smaller than its competitors at News Corp, NBC Universal and Viacom, but Food and HGTV consistently rank among the highest-valued cable properties in the U.S.

U-verse is a small but growing cable provider in a market where broadband occupies an ever-increasing market share. The provider has gone from 1 million subs in 2008 to 2.7 million this year.