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March 7, 2013

Programming Costs—Viacom, Time Warner Chiefs Give Their Thoughts

With Cablevision's antitrust lawsuit against Viacom top of mind, programmers at Deutsche Bank's media conference Monday weighed in on the value of pay TV. "We don't think the multichannel bundle is becoming less of a good deal. We think it's becoming a better deal, and a better deal in the opinion of customers" said Time Warner' s Jeff Bewkes, saying there is a lack of evidence of cord-cutting or cord-shaving and the hours of TV viewership continues to increase. "If the price was too high, you would expect to see people revolting in some way. You'd expect to see them cutting their packages. And yet if you look at the low-priced offers that DISH offers, if you look at Time Warner Cable's Essential package, nobody buys them."

Even if he's wrong and lower-priced packages with less programming (no sports) become more mainstream, "we're well positioned... We have a bigger percentage of must-carry networks in the top 40 than any other media company." TNT is well below ESPN's more than $5 per sub, at $1.21, according to SNL Kagan estimates. But with NBA and other sports programming, it's one of the highest-priced national nets. And that price is likely to grow as Turner has renewals up with almost every distributor between now and '16.

The target of Cablevision's lawsuit (Cfax, 2/27) spoke at the conference later in the day, with Viacom CEO Philippe Dauman calling the suit "ill-advised" and "frivolous." Cablevision claims the programmer is illegally bundling less popular nets, such as Palladia and VH1 Classic, to must-have channels such as Nick and MTV. Dauman said the MSO signed a new multi-year deal in Dec that was the result of "vigorous" negotiations. "We made a number of concessions," including lowering the price from the ask, offering additional items, such as TVE rights and agreeing to CVC's request for a longer term on the contract, he said.

"Our networks in the aggregate based on Nielsen information have roughly 20% of all viewing on ad-supported cable in Cablevision," Dauman said. The percentage of programming spent that we represent for Cablevision is in the single digits. We provide great value. In fact, 11 of our networks have higher ratings than MSG Network in 2012 on a year-round basis. That includes TeenNick... Nick Jr has vastly higher ratings. But the MSG family of networks charges a lot more than all of our networks combined."

There's that issue of sports costs again. MSG used to be owned by Cablevision, but the RSN's parent company Madison Square Garden Co was spun off in '10. Cablevision CEO Jim Dolan is exec chmn of Madison Square Garden. Cablevision isn't backing away, issuing a statement shortly after Dauman's presentation: "The tactics employed by Viacom are illegal, anti-consumer, and wrong, and force Cablevision's customers to take and pay for more than a dozen channels they don't want in order to receive the Viacom channels they want. Viacom's abuse of its market power prevents Cablevision from delivering more programming choice, particularly among networks that compete with Viacom's less popular channels."

Back to the question of the future of the pay TV bundle, both Dauman and Bewkes said they were agnostic. "You'll always need great content. To the extent there are more outlets out there, it's good for us," said Dauman. Bewkes said no one has come up with an OTT business model that works, however. As for Netflix's much talked about "House of Cards," Bewkes said he thinks it's "pretty good," though he noted there were lots of other great series on other nets, including Time Warner's.

What about the Netflix's decision to make every episode available online immediately? "What you're describing is HBO 10 years ago," he said, and seemed to be advocating for a mixture of both, calling Netflix's model a good thing. "We don't think it's the best way to launch a series. Think of 'Game of Thrones'... we don't want to put it all up at once. We want to introduce it, have the water cooler effect. And as you all know, if you find out about it mid-season, you can go watch the whole season on HBO On Demand. You can also watch all the old seasons."

Ed Note: This story originally appeared in CableFAX Daily. Go here to subscribe.







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