Affiliate fees for Viacom Inc.'s cable networks will rise next year, president and chief operating officer Mel Karmazin said at an investor conference here last Monday, but he figures they're still a great value.
"If those who do models want to put in one number for affiliate fees, they can put in high single digits for Viacom," Karmazin said at the CS First Boston Media & Telecom Conference here. "It's the biggest bargain in America."
Less Than ESPN
To back up that claim, Karmazin said that affiliate fees for all of Viacom's cable networks combined total $1.75 per subscriber per month, dramatically less than the $2.61 per month that some published reports have said The Walt Disney Co. charges for one network — ESPN.
Viacom's cable networks include MTV: Music Television, VH1, Nickelodeon, Black Entertainment Television, Spike TV, CMT: Country Music Television and Comedy Central, among others.
He added that in addition to the low affiliate fees, 26% of all television viewing is done through a Viacom property — 56% higher than the next largest company.
"We're doing that all for $1.75. If your cable bill is any more than $15 a month, we're getting screwed," he joked.
But while Viacom affiliate fees may be a bargain, at least in Karmazin's mind, the media giant hinted at another conference that it might start asking for cash or multicasting carriage from cable operators in exchange for retransmission consent for the CBS Television Network and its local television stations.
At the UBS Warburg Media Conference last Monday, Viacom chief financial officer Richard Bressler acknowledged retrans consent was a very valuable asset to Viacom.
"Our retrans assets, at CBS or on the local level with our television stations, we have the ability to do multicasting, we have a collection of assets that we can use as a piece of our leverage. We don't work for the cable operators, we work for you guys [investors]. The whole trade off is to drive the most money to the bottom line."
After the presentation, when asked if Viacom would ask operators for cash for retrans consent, Bressler declined to be specific.
"We're always pushing for value," Bressler said. "That [retrans] is a very valuable asset."
Cash for retransmission consent is rare, with most programmers opting to use that leverage to force cable operators to carry less-popular networks.
Karmazin also addressed several published reports that Viacom was considering selling its 80% stake in video-rental giant Blockbuster Inc., adding that Viacom is not "compelled to do anything."
When Viacom spun off 20% of Blockbuster to the public about three years ago, Karmazin added, the intention was to sell the rest at another time. Market conditions were not favorable.
In the meantime, Karmazin said that Blockbuster is contributing significantly to Viacom's results.
"We'll do what is in the best interest of our shareholders, including doing nothing," Karmazin said.
Later, in a separate presentation, Blockbuster chief financial officer Larry Zine said that whatever Viacom does, it will not affect operations.
"Blockbuster is operating the way it should operate," Zine said. "We're doing whatever we can to generate growth. Viacom is a great parent company. With them or without them, I don't think it will make a significant difference in the way we operate the business."