Cablevision’s bundling lawsuit against Viacom, released in full Thursday, lifts the veil on hardball negotiating tactics in large-scale carriage agreements.
Per the suit, Viacom would have forced the cable operator to pay a fee greater than its entire 2013 programming budget as a penalty for refusing to carry all the channels that Viacom sought to include in an omnibus agreement with Cablevision. Cablevision maintains that Viacom’s stance violates federal and state laws against block booking.
A redacted version of the suit, 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,” the suit 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 and Logo, Palladia “have low or extremely low viewership” and would not be able to compete on their own, Cablevision said.
The actual lawsuit, vs. the summary provided by Cablevision last week, reinforced what many industryites suspected: that Cablevision, led by CEO James Dolan, was still fuming from negotiations late last year that ended in a long-term carriage deal with Viacom on Dec. 31.
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.”
Cablevision asserts that if it did not have to carry all the Viacom nets, it would be more likely to launch, or launch sooner, a string of other channels, many of them from smaller programmings, 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.
Cablevision’s suit asks the judge to vacate the Dec. 31 carriage deal, to bar Viacom from linking carriage of any of its networks in a new deal and to award triple damages plus costs and attorneys fees.
Cablevision’s suit is seen as a bold challenge against long-held industry practices for the largest congloms. Some industry observers are skeptical about whether the suit will go all the way to trial but there has been speculation that it could move the industry closer to the a la carte ordering for cable channels that consumer advocates have long sought.
