News

Lessons From the Retrans Wars

11/08/2010 12:01 AM Eastern

Lately, cable operators and content
providers have been duking out contractual issues and
pricing in the public arena. The past few weeks have been
particularly ugly with Fox and Cablevision Systems quarreling
over the worth of Fox’s content, resulting in millions
of New York metropolitan-area cable subscribers
being left without access to Fox during the World Series.

Outside of the court of public opinion, these issues ultimately
bring threats of regulation and litigation that could
threaten to disrupt the ecosystem of the entire cable industry.
Considering other factors already weighing down
the industry, including the move to online programming,
additional industry oversight or legal interference are
other moves that could hurt subscribers more than the
operators and content providers.

Fox and Cablevision are just two of many companies
that have gone to war recently over content pricing (Fox-
Dish Network and DirecTV-Versus are two other examples).
The dispute received national attention not only
due to the fact that millions of subscribers missed out on
one-time sporting events (such as Major
League Baseball playoff games) and programming,
but because it was one of the
longest blackouts to date.

Consumers were understandably upset,
and public opinion swayed toward
supporting Cablevision rather than Fox.
These disputes always force us to ask who
is right: the cable operator or the content
provider? Due to the nature of the situation
and how it unfolded in the public
arena, neither side is right — though both
sides’ arguments are clear.

These negotiations take place regularly;
however, the issue with these types
of disputes between heavyweights is
the potential for regulation and arbitration
that could impact the industry as a
whole. Content
providers such as
Fox should have
the right to question
the worth of
its content to distributors,
as long
as the provider is
holding every cable
operator to the
same standard.
This perspective is
not popular with
subscribers or operators,
yet it goes
back to the simple
idea that everyone should pay appropriate and equal
value for meaningful content.

This is not to say that regulations or legal action should
always be frowned upon. In some circumstances, regulations
or arbitration might be an absolute necessity.
However, with regards to an industry that is already under
intense oversight, this additional government or legal
action is something that could come back to negatively
impact subscribers. Anyone who has ever gone through
a mediation process in a lawsuit can tell you that no one
feels satisfied with the end result. The same is true here.

The bottom line is that this industry benefits only if two
considerations can come to fruition. First, consumers
would need to consider paying the maximum possible for
the value delivered to them for both access to broadband
services and content. Of course, subscribers want the best
value for the product they are purchasing. However, these
disputes or resulting legislation can change the subscription
terms and mean increased rates for consumers.

Second, there needs to be assurance that pricing and
entitlement over the use of access services and content
are fair and uniform across providers — meaning no anti-
competitive practices. Therefore, operators should not
be allowed to treat the use of network resources differently
for content they directly provide versus content provided
by over-the-top (OTT) fi rms. Nor should they be allowed
to control the network any differently for
one OTT provider than for others. Similarly,
content providers should charge
operators uniformly for the content they
sell. Cablevision should not pay more
than other distributors such as Comcast,
Time Warner Cable, AT&T U-Verse, Dish
Network or DirecTV.

If these key issues are not agreed upon
sooner rather than later, content providers
will be forced to pull the plug on
cable operators — leaving consumers
in the lurch. Th e industry has already
started responding to a wave of technological
changes in recent years, as device
manufacturers are actively infl uencing
the future of cable. Operators and content
providers are already at risk of losing
valuable customers
as subscribers
migrate
away from traditional
cable.
Th e Fox-Cablevision
dispute ultimately
shows
that it is in everyone’s
best interest
for these
types of negotiations
to stay behind
the scenes
and get resolved
quickly, so that
the industry can put the focus back where it belongs — on
the subscriber.


Michael Manzo is the chief marketing officer of Dublin,
Ireland-based subscriber optimization software provider
OpenNet.
September