Karmazin to Play Retrans Chip for MTVN Cable Nets

5/21/2000 8:00 PM Eastern

New York-Despite the rancor and controversy engendered by the Time Warner Cable-ABC Inc. dispute, Viacom Inc. will still look to use retransmission consent to drive carriage of MTV Networks' services, Viacom president Mel Karmazin said last week.

"We have an awful lot now of retransmission to be able to take to Viacom and have Viacom use CBS retransmission consent to get additional carriage for its properties," Karmazin said during the Banc of America Securities LLC "Growth Telecommunications Media and Entertainment Conference."

In a later interview, Karmazin said the former CBS Cable channels that are being merged into MTVN-The Nashville Network and Country Music Television-already have fairly good distribution.

But Viacom can use retransmission consent for its TV stations, which include the CBS owned-and-operated stations, in order to get wider carriage for MTVN outlets such as MTV2 and Noggin, according to Karmazin.

MTV2, a music-video channel, has 12 million subscribers. Noggin, an educational kids' channel, is in 4.5 million homes.

Karmazin's remarks sparked ire from some cable operators, who said their worst fears about the Viacom-CBS Corp. merger were being confirmed: that Viacom would use retransmission consent as a club to force cable operators to carry fledgling, unproven cable networks.

"Why should this surprise anyone?" asked Matt Polka, president of the American Cable Association, which represents nearly 300 small independent cable operators that serve more than 3 million subscribers.

"It's retransmission-consent blackmail," Polka added. "And he's so bold about it because legislators and regulators have allowed this to happen.[for cable operators] to be forced to take these marginal start-up services is blackmail."

At present, retransmission-consent deals are in place with CBS and most of the major MSOs, according to Karmazin. But new deals with Charter Communications Inc. and some smaller MSOs are still pending, he said.

Late last year, the ACA filed a petition with the Federal Communications Commission asking the regulators to deny the transfer of CBS' licenses to Viacom as part of the merger of the two media giants.

In its filing, the ACA warned, "The immense market power the combined CBS/Viacom entity will wield in retransmission-consent negotiations spells trouble for smaller, independent cable and its customers."

Viacom has received a 12-month waiver of federal regulations that bar a company from owning TV stations that reach more than 35 percent of the country. The company now owns or operates TV stations-those of CBS and United Paramount Network-that reach 41 percent of all U.S. TV households, 6 percent above the limit.

At last week's media conference, Karmazin said he has no intention of getting into a battle with cable operators over retransmission consent the way Time Warner Cable and The Walt Disney Co.'s ABC Inc. unit did earlier this month.

In that widely publicized battle, Time Warner dropped ABC stations in markets reaching 3.5 million subscribers for 39 hours, sparking a public furor and a slap from the FCC. Karmazin called the run-in of those media giants "a shame ... but it proved the importance of content."

He added: "If there was a winner, the network [ABC] won. I believe the other MSOs, given the choice, are not going to want to go to war with a broadcaster. I know they won't want to go to war with a broadcaster that owns an awful lot of radio stations. The idea is that you should believe it is very good to be a broadcaster with cable assets."

Frank Hughes, senior vice president of programming for the National Cable Television Cooperative, which represents small and midsized MSOs, said that nowadays, "It's like companies buy up all of these cable assets to do retransmission consent."

Hughes was none too happy with Karmazin's remarks, particularly since Time Warner "was wrung through the FCC and scolded" for taking a stand against Disney and ABC on retransmission consent.

"We're just going to have to see how this plays out in the marketplace, I guess," he said. "Maybe that's what it's going to take to take this monkey off our back."

The NCTC at one point filed a suit, later settled, over MTVN's bundling of its services and its license fees. And the co-op doesn't have an affiliation agreement with either TNN or CMT.

Polka saw Karmazin's reference to Viacom's radio stations as "a direct threat to take every asset" Viacom has to paint MSOs in a bad light in the event that a retransmission-consent dispute ever did flare up between a cable operator and Viacom's CBS-or possibly its UPN-TV stations.

But according to Karmazin, he and Viacom have no desire to fight with cable operators over retransmission consent. "I have no intention of going to war with the MSOs," he said. "CBS made that mistake several years ago."

During the first round of retransmission consent, former CBS head Larry Tisch tried, unsuccessfully, to get cable operators to pay cash to carry CBS-owned TV stations.

NBC, Fox Broadcasting Co. and ABC instead used retransmission consent as leverage to get cable operators to distribute their new services-America's Talking, FX and ESPN2, respectively.

Much later on, CBS reportedly used retransmission consent to get some carriage for its start-up service, CBS Eye on People, which debuted in March 1997.

And most recently, Disney at one point asked Time Warner for straight cash compensation for carriage of its TV stations, reportedly seeking a license fee of 65 cents per subscriber. The MSO passed.

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