Changes in the Air for Cable?


Last week marked the first week of autumn, and there was a definite change in the air regarding the prevailing climate in the cable-television marketplace.

If ever there was any doubt who is the cable kingpin, those doubts disappeared last week when Comcast Corp. — intent on reducing its programming costs — won in its protracted lawsuit against Liberty Media Corp. over how much the MSO should pay for Starz Encore Group's premium channels.

Comcast's Brian Roberts again made it loud and clear that he was not afraid to take on anyone — even Liberty's John Malone, who once was the most powerful man in cable. But that was before Malone sold his Tele-Communications Inc. systems to AT&T Corp.

There was something very symbolic about the outcome of the Liberty-Comcast settlement last week, which pitted the new cable giant against the old.

It's kind of like that Gene Pitney song, "The Man Who Shot Liberty Valance." Remember, he was "the bravest of them all."

And that's what Comcast's Roberts did when he refused to pay the licensing fees, a sweetheart deal that Liberty's Malone had cut for his own Starz Encore, but not one that was sweet for the former AT&T Broadband cable systems that Roberts had acquired from him.

Analysts estimate that by winning a favorable settlement, Comcast had shaved off some $200 million in its programming costs. There was a certain sense of poetic justice about the outcome of the suit.

In another totally unrelated set of events, perhaps the scales have tilted for Viacom, the current media darling of Wall Street. It got whacked hard when it reported a drop in profit from declining local ad sales.

Investors punished Viacom upon hearing that news, and the company's stock dropped $1.42 a share that day.

Viacom lowered its growth forecasts, accordingly, taking down earlier estimates for high, single-digit growth. That was a distinct change in tune from Viacom president Mel Karmazin, perhaps the industry's biggest and loudest bull, when it comes to making predictions about ad-sales growth.

The drop in local ad sales from one of the most aggressive peddlers of television time is definitely something to keep an eye on going forward.

On yet another front, I'm sensing that things are definitely heating up between cable operators and broadcasters over digital must-carry. In an off-the-record summit which my company hosted last week in Washington (and I would have to shoot myself if I told you more, because it was an off-the-record meeting), tempers were flaring over that topic.

Someone at that conference had asked me in private what I thought the hottest story for cable in 2004 would be and, without hesitation, I said digital must-carry. The cable operator who had asked seemed a little surprised with my answer. He thought I would say the new pumped-up DirecTV, or the ramifications of further heightening tensions between cable operators and programmers over license fees.

Yes, I think those things will happen, too, and their aftermath — like that of Hurricane Isabel, which Washington is still coping — will be messy.

But digital must-carry could be cable's hurricane of the century. And trust me, I'm not the only one who is seeing the changes in the air.