Dolan To Programmers: Don't Price Yourself Out of Business
Cablevision CEO Says Cable, Broadcast Channels Shouldn't Make Same Mistakes As Music Business
Mike Farrell -- Multichannel News, 1/6/2010 8:04:15 PM
While its dispute with Scripps Networks rages on, Cablevision Systems CEO James Dolan said programmers that increasingly insist on huge affiliate fee increases are running the risk of pricing themselves out of business at an industry conference late Wednesday.
Speaking at the Citigroup Global Media & Telecommunications conference in San Francisco Wednesday, Dolan said that Cablevision tries to provide customers all the programming that is available to them. But that gets increasingly difficult as costs for broadcast stations and cable channels continue to rise.
"The bundle continues to get more and more costly to provide, which is going to result in higher and higher fees to the customer base," Dolan said at the conference. "I worry more for the programming business that they don't make the same mistakes the music business did and allow a disruptive technology or government intervention to come in and then undermine the overall economic model. They've got to watch it too. This is going to be an interesting next five years. Are we going to see an $80 or $100 bundle for basic service? That is not completely out of the realm of possibility with the kind of acceleration we're seeing in fees."
Cablevision is currently in a spat with Scripps' Food Network and HGTV, which the programmer pulled from Cablevision's 3.1 million subscribers on Jan. 1 after failing to reach a carriage agreement. Cablevision has claimed that Scripps is seeking to triple the rate the cable company pays for the network, while Scripps has stressed it is only seeking fair value for its content.
Late Wednesday, after days of increasingly contentious comments, the two sides met briefly for the first time since the networks were deauthorized by Scripps, offering a glimmer of hope that a deal could be reached. Scripps characterized the meeting as productive and that the two parties have made "limited progress."
Although consumers that download and view programming online for free has also been a concern for distributors - the TV Everywhere initiative was created precisely to protect the distribution model -- Dolan believes that retailers like cable operators will weather that storm in the long run. Wholesalers, and especially niche networks, have more to worry about.
"Networks like Food Network, with a limited amount of audience, if they had to go a la carte or on demand, that would completely destroy their model," Dolan said. "They've got to be concerned with that."
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Ok perhaps I was a bit too hard on the Dolans. Actually I do not side with Scripps by any means. Scripps has completely dissed their own customers (not Cablevision) by pulling their channels from US and I'm very angry about it, especially when they didn't do that in recent other negotiations past contract expiration date. I agree that Scripps should get an increase but not as high as they are allegedly demanding. They need to be reasonable. I suspect TWC hastilly paid them too much to complete their deal and set an unfortunate precedent. Cablevision's smaller than TWC and Scripps needs to meet Cablevision halfway. I've been a loyal Cablevision cutomer for decades. I'm just a frustrated customer missing channels I watch regularly.
I understand what you are saying, Chris, and you have a point but a la cart pricing per channel would be modelled quite a bit higher than bundle pricing per channel to make up the difference so I'm not convinced failure would be imminent.
AnneM - 1/8/2010 12:16:05 PM EST -
Your math may be correct, but your application of it is entirely wrong. Dolan is 100% spot on that networks like this would go out of business if they had to go On Demand or ala carte. These tiny fees we pay for each network basically finance the production of the shows, and the networks sell advertising on those shows to make their profit. Sure, a lot of people would pay for these networks ala carte, but not nearly as many that are currently forced to. Think about how many MILLIONS of cable customers throughout the country would stop paying that .30 to .50 cents or so. The financial loss would be devestating to networks like Scripps. They would not have enough money to produce as many shows, which would mean less product to sell advertising on, which combined with the lower rates for the advertising space they do sell due to decreased average audience would make it extremely difficult to impossible for these networks to make a profit, and making a profit is why these networks exist in the first place. If they cant make money, they will cease to exist. And it may not be a bad thing if cable tv became less nichey.
Chris - 1/8/2010 11:29:17 AM EST -
Mr Dolan is absolutely wrong about Scripps survival should their channels be offered to us a la carte, and he knows it. I've done the math on this dispute and Scripps is asking a reasonable price (an avg. of .35/chan/mo/home from .11) for these two popular cable channels. While the increase requested is in fact 300%, we're talking 5 years between negotiations and contracts here. Dolan just prefers to keep lining his own pockets instead of passing on the rate increases they've ANNUALLY imposed on us customers to deserving valued content providers such as Scripps. I'm paying at least $5/mo more EVERY year. Where is it going? A mere .50 of that can't go to Scripps??? Cablevision dropped 18 valued channels in the last 2 years from the iO basic package and added fewer than a handful! Why am I paying more for less????
AnneM - 1/6/2010 9:27:55 PM EST
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