Dealmaking Like Big Guys - Multichannel

Dealmaking Like Big Guys

Author:
Publish date:

Breaking with past practice — and seeking the cost savings that large MSOs enjoy — the National Cable Television Cooperative has reached a broad, long-term carriage deal with MTV Networks that guarantees that nearly all of the programmer's services will get widespread distribution from the co-op's members.

"The co-op is really reinventing the way they want to do business with programmers, and this deal is a real reflection of that," MTVN president of affiliate sales and marketing Nicole Browning said last week.

AIDS CMT, TV Land

The renewal deal struck by MTVN and the NCTC — after more than a year of tough negotiations — shores up distribution for the programmer's core services and will increase carriage for TV Land and CMT: Country Music Television.

NCTC members will continue to carry Nickelodeon, MTV: Music Television, VH1, TV Land, CMT and Spike TV on basic or expanded basic.

But TV Land and CMT will also get launches before about 2 million additional homes each through the course of the contract.

NCTC members also will launch six MTVN digital networks in their systems that roll out digital services. MTVN's digital networks include Noggin, Nickelodeon's Games and Sports, MTV2, VH1 Classic, Nicktoons and MTV Hits.

There is also a provision that bars any NCTC member who has dropped a MTVN service in the past 12 months from participating in the new contract.

The hefty distribution obligations in the NCTC renewal deal — and its mandate of broad carriage for nearly all of MTVN's channels except Comedy Central, which has its own NCTC deal — make this a unique affiliation agreement for the co-op.

"In order to achieve parity and true big-MSO economics, the NCTC had to step up the plate and act like a big MSO," said Scott Abbott, the co-op's vice president of programming and national accounts. "And they've done that with this deal."

The NCTC represents more than 1,000 independent cable companies with more than 15 million subscribers, bigger than such MSOs as Time Warner Cable and Cox Communications Inc.

Even with that large subscriber base, the co-op has never enjoyed the volume discounts on license fees that large MSOs get. Unlike big MSOs, the NCTC typically wasn't able to guarantee programmers carriage with a specific number of subscribers. Members are free to decide whether or not to participate in any particular deal. If they opt out, they must do their own individual deal with the programmer in question.

The NCTC also seemed loath to do carriage deals in which large numbers of networks were bundled together. In fact, several years ago the co-op sued MTVN over this issue of bundling, which ties lower license fees to carriage of several of a programmer's networks.

But if the NCTC were just to continue "cherry-picking" from among MTVN's channels, it wouldn't have gotten the lowest rates possible for its members in this contract, Abbott said.

Regarding the no-drop clause, Browning said, "The deal does contemplate that no one can have dropped one of our services in the past year for them to participate under the NCTC-MTVN deal. "

Asked why this clause was included, Browning said: "Since this is an all-inclusive deal with broad distribution of our networks, the members that participate have to reflect that philosophy. I think that was a driving theme."

But sources suggested NCTC members who had dropped MTVN services in the past year would not indefinitely be barred from electing to go under the new contract.

From time to time, cable systems in small rural markets have argued that their subscribers were not interested in MTV, or had moral objections to the network, and have deleted it.

Galaxy Dispute

This summer, MTVN pulled four of its networks off Galaxy Cablevision, which has its own contract with the programmer, not through the NCTC. Sources close to the programmer blamed it on a fee dispute, while Galaxy said it objected to carrying Spike TV.

From 600 to 700 NCTC members were carrying MTV's services like Nick, MTV and VH1 under the old contract, which expired in the summer 2002. The NCTC's TV Land deal expired in December 2001, and the co-op never had deals with CMT, Spike TV or MTVN's digital suite. This new deal puts all those networks, to be widely carried, under one contract.

"The reason we're able to do that — which, by the way, is not the first time we've done deals that guarantee distribution — is because of those brands," Abbott said.

The NCTC can meet its distribution benchmarks if those 600 or more members stay in the deal.

Added Browning: "They were really willing to make commitments largely based on the strength of the brands. They were willing to make commitments for distribution that mirrored the kind of commitments that we've been getting from similarly sized MSOs."

Related