Hard to see advantages of Cablevision’s suit against Viacom

Cablevision Chief Executive James Dolan.

Cablevision’s lawsuit this week against Viacom for “illegally” bundling desirable cable networks with channels that have low ratings must offer the cable operator advantages that can only be seen in the sealed court documents, because they don’t otherwise seem very clear.

After chatting Wednesday with communications law expert Fritz Messere, dean of SUNY Oswego’s School of Communication, Media and The Arts, and Tuna Amobi, media and entertainment analyst at S&P Capital IQ, it seems that each potential rationale for the move seems implausible or facilitates a scenario that would have been possible without litigation.

Rationale #1: Cablevision simply realizes it made a bad deal with Viacom last December (perhaps one in which it pays more money than a rival like Time Warner Cable), and sees a chance to get out of it.

In the cold, hard world of American business, isn’t a deal a deal? Surely that would be Cablevision’s argument if a programmer said it wanted to tear up its existing contract and charge Cablevision more money, after all.

The other difficult question in legal terms is why Viacom, acting exactly like every other owner of widely-distributed cable networks, now constitutes a particular threat to Cablevision that is not posed by Time Warner Inc., Walt Disney Co. or News Corp.

“Cablevision would have to convince the court that the consumer is somehow being harmed by not dis-aggregating these services,” Messere said.”Is Viacom so strong that it can dictate terms that impact all of major program providers?  I’d be inclined to say ‘no.’  I’d almost be inclined to say that Disney has such power with ESPN, not Viacom.”

Amobi agrees. “[Bundling] has been an accepted norm in the industry, so I don’t know how Cablevision is going to claim that it was forced into a contract that it had no choice but to sign. They really face an uphill task.”

Rationale #2: Cablevision wants to set a precedent that will be useful when it comes time to negotiate once again with more formidable companies like Time Warner, NBC Universal, Disney and News Corp.

The problem here, Amobi said, is that Viacom doesn’t participate in the two areas most typically associated with rapidly rising costs for pay-TV distributors.

“They don’t own a broadcast network or TV stations, so they’re not part of the noise over retransmission,” Amobi explained. “And you could argue that they’re not a player in sports … So that’s why I’m frankly surprised that Cablevision would pursue this.”

Said Messere: “Could it be proven that, on a year-over year basis, that programming costs have become anti-competitive? I don’t know. I don’t think it could be proven that only Viacom was anti-competitive.”

However, he added that Cablevision could feel that this is a good time to make noise about these matters, with the Obama White House looking to make its mark during a second term.

“We do have a Democratic administration for the next few years. 2016 is not that far away, and that’s 20 years after the Telecommunications Act of 1996,” Messere pointed out. “There may be a movement on the part of some Congressmen to start rethinking the must-carry rules, the multiple-ownership rules, the programming rules as relate to a level playing field. I think the courts would go crazy if someone tried to regulate cable in the way that broadcasters are regulated.

“But I do think there’s a discussion there, and where there’s a discussion, there could be action. Where there’s smoke, there’s fire.”

Messere thinks a la carte could once again be on the table, perhaps with someone like New York Sen. Chuck Schumer out in front.

Amobi isn’t so sure. “I think a la carte is still a long shot. I don’t see the political will to push it through in Washington, and the FCC has a pretty full plate.”

Then, too, he said, it would be unusual for a pay-TV operator to favor actual a la carte, which could upset the industry’s entire apple cart at a time when “over the top” video providers are gaining traction.

Rationale #3: Cablevision wants to apply public pressure to Viacom that will help it renegotiate better terms, making the owner of MTV and Comedy Central look greedy.

“I think there is some posturing here,” Amobi said.

However, this is exactly the kind of public stance that both sides take when there is a dispute over carriage fees. The distributor tells its customers the programmer is charging fees that are too high, which ultimately gouges the consumer. The programmer tells its viewers the distributor doesn’t want to use the huge sums of money it charges the average Joe or Jane each month to pay its fair share for the TV networks everyone loves, and should be urged to do the decent thing and let people see their shows.

No lawsuit is necessary to do this.

Viacom’s ratings weakness, especially at MTV and Nickelodeon, should provide enough ammunition, as proved to be the case for DirecTV in its dispute with Viacom last year.

— David B. Wilkerson