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Cable Technology Feature Article

June 23, 2014

Cablevision Argues Channel Bundling Violates Antitrust Law

By Gary Kim, Contributing Editor

If and when video distributors (cable TV, satellite TV, telco TV) win more freedom to buy only the channels they want to distribute, instead of bundles of channels, they will be able to better control retail costs.

At the same time, those very actions will increase incentives for program owners to empower rival distribution providers. So even by winning, legacy distributors will be losing. And even while losing, content owners will win.

That’s paradoxical, but a reasonable illustration of how the video entertainment market is being driven to change.

Video content owners cannot expect to keep boosting prices at rates much higher than rates of inflation, indefinitely. Video distributors cannot keep passing along those increases to their customers, indefinitely.

Sooner or later, less-popular channels will not be sustainable except possibly through online distribution. And many would argue even that will not generate enough revenue to sustain online versions of lightly-viewed channels for long.

Cablevision Systems (News - Alert) Corporation, in fact, has filed an antitrust lawsuit against Viacom International and Black Entertainment Television (owned by Viacom), asserting that forced bundling of Viacom (News - Alert) channels by Viacom violates U.S. and New York antitrust law.

The issue is simple. Licensing provisions require Cablevision to buy Viacom channels it doesn’t want to buy, in order to secure rights to distribute Viacom channels Cablevision wishes to offer customers.

Such provisions constitute illegal “tying and block booking arrangements” under the federal antitrust laws, Cablevision argues.

The point, some would argue, is that what holds up mass market online video, of the sort normally viewed on subscription video services, is the content owner business model.

Up to this point, program owners and networks have made more money under the current scheme than they arguably would under a framework where distributors were able to buy only the channels they wish to sell to consumers.

If that sounds very much like the “bundled” approach retail video service customers now experience, that is no accident.

In turn, video distributors believe they make more revenue, and incur less cost, when selling consumers a bundle of channels, instead of selling them one at a time.

So the whole system will change in a significant way only when program owners conclude they can make as much money, or perhaps more, by adopting both online distribution and a la carte sales.

Both presently are questionable moves, at least where it comes to the most-popular channels. But the breakdown will happen first with the lightly-viewed channels distributors are disinclined to purchase and sell at retail. 

Edited by Maurice Nagle

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