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Cablevision: Viacom Sought Huge Penalty

Redacted version of lawsuit finally public

Cablevision’s controversial lawsuit, released in full on Thursday, revealed that Viacom would have forced it pay an amount greater than its entire 2013 programming budget as a penalty for carrying the core networks it wanted and dumping the rest.

A redacted version of the cabler’s suit against Viacom, filed early last week in federal court in Manhattan, was finally made public after the two sides came to agreement on what confidential information should be blacked out — basically all the dollar amounts and some of the dates.

The suit accuses Viacom of antitrust violations for forcing the cable company to carry on its systems more than a dozen low rated networks to get hold of popular channels like Nickelodeon, Comedy Central, BET and MTV. These so-called core nets, which include VH1, TV Land and Spike TV are “commercially critical,” Cablevision said. “If Viacom withheld any or all … for a significant period of time, Cablevision would be severely disadvantaged.”

“Cablevision operates in an intensely competitive environment against both established and new distributors of video services,” it said. “A substantial number of subscribers” would likely bail if it lost the core networks, it acknowledged.

On the other hand, a suite including Centric, CMT, Logo, Palladia and others “have low or extremely low viewership” and would not be able to compete on their own, Cablevision said.

The actual lawsuit, versus the summary provided by Cablevision last week, reinforced what many industryites suspected: that Cablevision, led CEO James Dolan, was still fuming from negotiations late last year that ended in a new long-term carriage deal with Viacom on December 31, even though they signed it.

With no specific numbers visible, the general idea is that Viacom offered Cablevision the untenable option of “a ten figure penalty” to carry just the core networks — the equivalent of adhering to an official rate card that it acknowledged was rarely ever used.

“Cablevision confirmed to Viacom that the only distributors that it permits not to carry suite networks and therefore would have reason to invoke the rate card, are small distributors that face severe bandwidth limitations.”

“Cablevision accordingly surrendered to Viacom’s coercive tactics and entered into an agreement with Viacom on December 31 of last year for distribution of both the core and the suite … only because Viacom refused to make an economically viable stand-alone offer.”

Certain to drum up some love, it said that absent the overhang of Viacom’s suite, it would be more likely to launch, or launch sooner, a string of other channels including arts network Ovation, InterMedia’s GMC, Me-TV, Magic Johnson’s ASPiRE, Retirement Living TV, Lifetime Movie Network, Outside TV, Justice Central, Blaze TV and additional foreign language channels .

Recapping Cablevision’s allegations: it alleges Viacom’s tying two channel bundles together is illegal under the Sherman Act, and the Donnelly Act and constitutes block booking under federal and state law. It’s asking the judge to vacate the Dec. 31 carriage deal; to bar Viacom from linking carriage of any of its networks in a new deal; to award triple damages plus costs and attorneys fees.

Cable programmers have been doing package deals for years and these cases have not have had particular success in court.

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