News

N.Y. BATTLE DRAWS D.C.’S GAZE

3/11/2010 6:39 AM Eastern

While no one dares guess
the end of the nasty carriage dispute
between cable giant Cablevision
Systems and entertainment
juggernaut Th e Walt Disney
Co. over retransmission-consent
fees, one thing is certain: It’s already
drawing fi re from regulators
in Washington. A fierce public-
relations campaign by both
sides has drawn massive media
attention around the country
— it was even discussed on ABC’s
Th e View — largely because it involves
WABC-TV, one of the largest
broadcast-TV stations in the
U.S. WABC serves metropolitan
New York, the heart of the media
world.

But unlike Cablevision’s last
programming dust-up — an ordeal
with Scripps Networks Interactive
that included Scripps
pulling its HGTV and Food Network
from the Bethpage, N.Y.-
based operator for about three
weeks — this latest dispute has
higher stakes. According to some
analysts, this and other recent
retransmission-consent scuffl es
have a common thread — distributors
have been successful
in attaching monetary figures to
these negotiations and have successfully
drawn Washington into
the argument.

Th at could have an impact on
two fronts. By insinuating dollar
values on channels, cable operators
may also be planting seeds
for a limited a la carte offering or,
at the least, smaller programming
tiers. And by drawing politicians
into the fi ght, they draw attention
to other hot topics — the revamping
of the 1992 Cable Act, which
created retransmission consent
in the fi rst place, or creating regulations
that require broadcasters
and distributors to enter into binding
arbitration if they are unable to
reach a deal on their own.

Cable operators have been calling
for a repeal of retransmission
consent for years. While they may
never get that, they could be gaining traction on other fronts. The
Federal Communications Commission
could enforce arbitration
rules (possibly good for cable and
consumers) upon jammed negotiations,
said Miller Tabak media
analyst David Joyce. And the latest
battles might also put operators
in a better light in customers’
eyes, “as they have been the beating
post on programming expense
increases” because of their
direct relationship with customers,
Joyce added.

Washington is definitely beginning
to pay attention. During the
Time Warner Cable dispute with
Fox — which included stations in
New York, Los Angeles and Dallas
— politicians such as Sen. John
Kerry (D-Mass.) and Rep. Steven
Israel (D-N.Y.) issued statements
calling for a quick end to the dispute.

During the Cablevision-ABC
spat, more than 60 state, local and
federal representatives — including
Kerry, Rep. Rick Boucher (RVa.),
Rep. Joe Barton (R-Tex.) and
Rep. Eliot Engel (D-N.Y.) — all issued
statements ranging from let
the market decide the outcome
(Barton and Boucher) to let this
“game of chicken” come to an
end (Kerry). Engel, however, may
have come closer to cable’s ultimate
goal, calling for regulatory
reform in a letter to FCC chairman
Julius Genachowski.

Engel invoked a pair of December
stand-offs — one between
Time Warner Cable and
Fox, and a second involving Sinclair
Broadcast Group and Mediacom
Communications — in
pointing out that a “previous dispute”
had threatened broadcasts
of college Bowl Championship
Series games.

“This situation is unacceptable. We cannot continue to allow constituents
to be held hostage during
business negotiations over
retransmission consent,” he said,
echoing Kerry, who has also suggested
the retransmission-consent
system needs fixing.

“I respectfully request that the
Federal Communications Commission
investigate the current
system and provide a regulatory
fix which will allow broadcasters to
receive fair compensation for their
product while not charging cable
and satellite providers or my constituents
outrageously high rates,”
Engel said. “Th e current situation
is harmful to cable and satellite
providers, harmful to broadcasters
and, most of all, harmful to my
constituents.”

In the meantime, Cablevision
and Disney continue to slug it out
in the media caldron of New York
City. ABC fired the first shot last
Monday, warning viewers that
it could fall from Cablevision’s
lineup at midnight on March 7.
ABC viewers in parts of New York
(Westchester County, the Bronx
and Brooklyn) as well as areas in
New Jersey and Connecticut could
miss the March 7 telecast of the
82nd Annual Academy Awards,
scheduled for 8 p.m. (ET).

Cablevision quickly countered,
claiming that ABC parent Disney
was demanding a $40 million
fee increase for the network (or
about $1 per month per subscriber), a figure that ABC has disputed.
Cablevision, which has about 3.1
million customers in the New York
area, also claims that it pays Disney
about $200 million for its cable
networks, including ESPN and the
Disney Channel.

What followed was a flurry of ads
in local newspapers and on television,
each of which essentially accuses
the other of being greedy.
Whether the dispute would be resolved
by the March 7 deadline was
uncertain at presstime.

Verizon Communications
wasn’t shy about exploiting the
dispute in its advertising, reminding
consumers that its
FiOS TV would continue to carry
WABC. On the satellite front, neither
Dish Network nor DirecTV
said they planned dispute-related
ads — yet — though DirecTV
spokesman Robert Mercer said
the company would be “monitoring
the situation.”

Th e two companies appear to
be talking — Cablevision CEO
James Dolan said at an industry
conference last week said that he
and chief operating officer Tom
Rutledge had met with Disney
CEO BobIger and Disney Media
Networks co-chairs George
Bodenheimer and Anne Sweeney
during the prior week.

And many analysts believe that
a compromise will be reached.
Collins Stewart media analyst
Tom Eagan predicted in a research
note that the two would
agree on a fee of 50 cents per subscriber
per month.

In the meantime, the battle
rages on.

September