Cablevision to Viacom: We won’t pay more money to prevent carrying bad channels

In late February it became known that cable provider Cablevision was suing Viacom over alleged anti-competitive activities involving the bundling of television channels. Viacom blasted the lawsuit as little more than a “transparent attempt […] to renegotiate our existing two month old agreement [with Cablevision].”

Cablevision continues to pursue the lawsuit. Today its complaint against Viacom – a mildly redacted copy – was released. Let’s start in bullet point format:

• Viacom has several tiers of content, including the Tying Networks, the Core Networks, and the Suite Networks. The Tying channels are the largest, and most commercially critical. Think of Comedy Central, and so forth. All Tying channels are part of the Core channels. The Core channels are therefore must-carries for Cablevision. The Suite channels are lower-value, given their lesser viewership.
• According to Cablevision, the ratings for Suite channels fell “markedly” during its last contract, leading it to wish to stop carrying them.
• When it came time renegotiate their deal, Viacom apparently was very opposed to Cablevision only selecting its Core Networks; it wanted Cablevision to carry and pay for all its channels.
• In its view, Cablevision was “strong-armed” by Viacom “into carrying Suite Networks” as Viacom had a “penalty” in excess of $1 billion in place if it did not. In practice, Cablevision had two options: carry both Core and Suite, or pay what appears – redactions are a pain – a higher price for just Core.
• Cablevision would have been content to dump the Suite channels, but as Viacom priced Core so high by itself, it had little option but to carry both. So it did. Now it’s suing over Viacom’s “diabolical and coercive scheme, which harms competition, consumers, and Cablevision, constitutes tying and block booking in violation of the Sherman Act and New York law.”

The redactions make this story quite difficult to follow, given that they could hide text that says “fifty percent” more, or “eight times” more. However, here is they key passage:

In summary: Viacom wanted more money to carry fewer channels, forcing Cablevision to pay for both Suite and Core channels, and thus in theory not carry other channels that could have competed with Suite channel viewership. The price decrease from Core only, to Core and Suite, was more than $1 billion, Cablevision alleges.

Cablevision needs to carry the Core channels, or it cannot compete as a cable provider. And as the price bump it would have to pay to carry fewer Viacom channels exceeded its total programming budget, it wasn’t an option. It therefore only had one option: carry both Core and Suite channels, against its wishes.

The tactics Viacom used “substantially [foreclose] competitors and thereby harms the competitive process” as they stopped Cablevision from carrying rival content.

Provided that we have properly parsed the redacted passages, which isn’t certain, it appears that Viacom’s tactics were at a minimum high-pressure. And as they used market position to force other activity to the detriment of their competitors, it’s not hard to call the behavior more than simple aggressive business, but anti-competitive.

Naturally, this is but a single side. Viacom will respond. The rest of this story will be interesting indeed.

Top Image Credit: Emilian Robert Vicol