ABC and Cablevision Face Off Over Oscars

Over-the-air broadcasters have long been jealous of the fat economics enjoyed by cable networks. But are they prepared to risk the wrath of consumers in their push to get what they feel is their due?

That's the question looming over New York City, where Disney (DIS) and Cablevision (CVC) are locked in a Mexican standoff that could leave millions of viewers without access to one of the biggest television events of the year. Disney is the parent of ABC, which, this Sunday, will air the Academy Awards, typically the second-most-watched program of each year after the Super Bowl.

But Disney says it will cease transmission of ABC programming, including the Oscars, over Cablevision's network beginning Saturday at midnight if the cable provider doesn't give some ground in negotiations over a new carriage agreement.

What Disney wants is for Cablevision to pay a retransmission fee for the right to carry ABC. Cable providers have always paid such fees to carry cable networks like ESPN and CNN, but have gotten away with retransmitting broadcast networks for free on the basis that those signals are beamed free over the airwaves in the first place.

But with the shrinking of network audiences and the downturn in the ad spending that supports free TV, the parent companies of the big broadcasters have been using their clout to insist that cable companies pay up. That was the central issue in negotiations between CBS (CBS) and Time Warner (TWX) that took place a year ago, and, more recently, between Time Warner and Fox. Both of those disputes were resolved without a blackout, and without disclosure of financial details.

Forcing the issue right before the Oscars is a high-stakes move on ABC's part. The danger is that the network will antagonize Cablevision's 3.1 million subscribers by taking away something they've come to expect without explaining what's in it for them. Disney's public relations effort hinges on the fact that Cablevision charges its subscribers $18 a month for broadcast retransmission but doesn't pass along any of that money to the broadcaster. The media conglomerate has set up a website urging Cablevision subscribers to switch to a different provider. Naturally, Cablevision is mounting an equal-but-opposite campaign suggesting that Disney is just being greedy.

Despite all the angry rhetoric, if the past is any guide, the two parties will find a way to work this out before Sunday. Both sides have too much to lose from stubbornness.