Rebelling Against the Cost Of Content Could Snowball

Small Operators Unafraid To Drop Channels
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Over the past several months, small cable operators have taken up the gauntlet regarding programming costs, led by Cable One, which dropped Turner Broadcasting System channels for about three weeks last October and has darkened 15 Viacom networks for nearly a month.

Last week Vyve Broadband, a small-market operator headed by former executives of Bresnan Broadband, threatened to drop Viacom on May 1, and launched an effort it called TV Revolution to fight back against high cost increases.

Vyve said Viacom demanded a price increase that will amount to a doubling of its fees over the next five years. “Although it was a difficult decision to remove the Viacom channels, giving in to their demands would have violated our commitment of providing our customers with the best possible product at the greatest value,” Jeffrey DeMond, Vyve CEO, said in a statement.

Viacom recently turned up the heat on Cable One — in what seems like a retaliatory effort — blocking the operator’s broadband customers from being able to access content on Viacom’s websites. Cable One declined to comment.

“Cable One has chosen to no longer carry Viacom programming and, as a result, it is no longer available to Cable One customers in any form,” Viacom said in a brief statement.

Matt Polka, president and CEO of the American Cable Association, which represents about 900 small cable operators, said the recent stance taken by small cable companies mirror the changes that technology has brought to the industry and what customers are saying they want.

“I think it has a lot to do with what consumers are trying to get on their own, which is more choice and control,” Polka said in an interview. “Our member companies have got a greater sense from their customer base to say, ‘We don’t care as much if we don’t have this programming as we did before because now we have other options.’ ”

Those other options are mainly content available online through a cable broadband connection.

Cable One has been a prime example of how broadband has changed the landscape. It kept its channel offerings at a minimum while focusing on higher broadband speeds. One of its most popular packages is about 40 channels of video bundled with 50 Megabit-per-second Internet service.

“I think that’s smart,” Polka said. “It recognizes a reality that is only going to develop stronger roots.

“Our member companies are more willing to take very tough stands with programmers to say, ‘Look, I’m not compelled or obligated to carry your content, and if you come and seek outrageous rate increases that aren’t sensitive to me or my customers, then we’ll just drop you,’ ” Polka said. Operators see the video business as declining anyway, he added, “compared to broadband, which is what they see as their future.”

The ACA chief said future battles could move beyond the likes of Viacom and see small operators drop high-priced sports networks, primarily regionals.

Regional sports networks carrying local team games have important programming, but as those networks have grown in number and the monthly per-subscriber fees have risen, distributors have been pushing back and not carrying them.

At the start of The Cable Show last week in Los Angeles, city mayor Eric Garcetti called on more pay TV distributors to carry SportsNet LA, Time Warner Cable’s new RSN that carries the Dodgers’ Major League Baseball games. TWC and affiliate Bright House Networks so far are the only major distributors carrying the network.

Polka said that as video subscribers continue to decline, more operators balk at high rate increases and programmers fall short of revenue expectations, Wall Street pressure might make an impact.

“It could [have] a snowball effect,” Polka said. “The race is on then. It would encourage MVPDs to take a stronger stance, to see they can have that kind of effect.”

Panel sessions at The Cable Show debated the point, but Polka said he believes a breaking point over rising programming costs might be coming soon.

“The programmers are only going to keep increasing fees for as long as they can get away with it,” Polka said. “We’ve reached the point where they can’t always get away with it. Maybe a little bit down the road, they’ll never get away with it.”

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