Cablevision Sues Viacom Over Bundling

Claims media conglom illegally forced cabler to carry lesser-watched ancillary nets

Cablevision Sues Viacom Over Bundling
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Cablevision’s antitrust lawsuit against Viacom is a rare instance of a distributor taking to the courts to fight bundling over anything but sports and it’s the second time recently one has picked a public fight with Viacom, whose networks went dark on DirecTV for nine days last July before the sides struck a deal.

Court challenges thus far haven’t been particularly successful. But the suit, which accuses Viacom of forcing the cabler to take both its top-tier and also-ran networks, is the latest salvo in an increasingly bitter battle between programmers and distributors over escalating fees. It took the biz by surprise Tuesday in federal court in Manhattan and had other distributors standing arm-in-arm behind Cablevision.

“We frequently have pointed out that there are serious problems with the current programming environment. We think this lawsuit raises important issues and we look forward to their resolution in the courts,” said Time Warner Cable.

The suit sends “a clear message to programmers that unlawful and irresponsible market tactics will not be tolerated,” chimed in smaller Charter Communications.

Even Chad Gutstein, COO of Ovation, a standalone arts network that was booted off Time Warner Cable early this year, lauded the suit for “drawing attention to anti-competitive practices that keep independent networks like Ovation from competing on a level playing field.”

Asked earlier Tuesday on a conference call about the general tenor of his affiliation talks, AMC Networks CEO Josh Sapan described it well: “The situation is that our distributors are feeling margin pressure. So they come to the table with that disposition. And we have this increased investment and very strong performance. So there is increased tension. We would like them to be a little smoother, but they probably can’t be. So that’s probably the state of the union today,” he said.

Cablevision claims that Viacom forced it to unlawfully carry and pay for 14 minor networks its customers don’t want, like Palladia, MTV Hits and VH1 Classic, in order to carry must-haves Nickelodeon, MTV and Comedy Central.

Viacom said it would vigorously contest the suit, which it called “a transparent attempt to use the courts to renegotiate an existing two month old agreement.”

Cablevision is indeed asking the court to throw out a December 2012 carriage deal with the Gotham media conglom and allow the parties to reach new terms free of any conditions to carry lesser networks.
“The manner in which Viacom sells its programming is illegal, anti-consumer, and wrong. Viacom effectively forces Cablevision’s customers to pay for and receive little-watched channels in order to get the channels they actually want,” Cablevision said in a statement.

“Viacom’s abuse of its market power is not only illegal, but also prevents Cablevision from delivering the programming that its customers want and that competes with Viacom’s less popular channels.”
For its part, Viacom said that at the request of distributors, it and other programmers “have long offered discounts to those who agree to provide additional network distribution. Many distributors take advantage of these win-win and pro-consumer arrangements. Reflecting the highly competitive cable programming business, these arrangements have been upheld by a number of federal courts and on appeal.”
Cablevision said the suit was filed under seal. A public version is not available but may be in redacted form in a few days.

The cabler said the suit alleges that Viacom abused its market power over commercially critical networks and coerced Cablevision by threatening to impose massive financial penalties unless Cablevision complied with Viacom’s demands.

It asserts that tying together rights and block booking violates federal antitrust laws. It said Viacom’s conduct also violates the Donnelly Act in New York State Law, which parallels federal anti-trust laws.
Beyond seeking to void its latest carriage deal, Cablevision is also asking triple damages and legal fees.