The Cablevision-Disney Oscar Fight Hints of Things to Come

Walt Disney (DIS) and Cablevision Systems (CVC) ended their game of digital chicken last night about 15 minutes after the Oscars telecast began, allowing Cablevision subscribers to see the rest of Hollywood's annual awards extravaganza. But while the two sides reached a tentative agreement to settle a fee dispute, more fights like this are bound to occur. So, don't be too quick to ditch your rabbit ears.

The reason, as theThe New York Times's Brian Stelter argues, is money. Media companies such as Disney, Viacom (VIA) and General Electric (GE) collect huge fees from cable companies for the cable channels they've created, such as ESPN, Comedy Central and SyFy, respectively. But the cable companies carry the broadcast networks (ABC, CBS, NBC and Fox) for next to nothing. As the audience for network TV continues to shrink and advertising dollars dwindle, the content providers that also own broadcast networks (such as Disney, in this case) can no longer afford that arrangement. On the other side, the cable companies are bound to cry foul over having to pay for something they had been getting practically for free.

In the end Disney CEO Bob Iger got what he wanted -- more money from Cablevision for carrying ABC.

"Although terms of the deal were not disclosed, a person familiar with the situation indicated that Disney ended up getting 55 to 65 cents per subscriber per month," according to the Los Angeles Times.

In the Nick of Time

Disney (which I own some shares of) took a huge risk. If Cablevision hadn't returned to the bargaining table, ratings for the Oscar telecast would have suffered, since about 3.1 million cable subscribers wouldn't have been able to see one of the biggest shows on TV. Ratings would have gone down, raising the possibility that Disney's ABC network would failed to meet audience targets promised to advertisers. ABC would then have had to provide free commercials (known as make-goods) to make up for the shortfall since Disney's New York affiliate, WABC, is the most-watched local TV station in the U.S. It's remarkable that the dispute got resolved nearly in the nick of time.

Recall that Cablevision's similar fee fight with Scrips Networks Interactive (SNI) lingered on for three weeks until the two sides reached an agreement to restore HGTV and the Food Network in the New York area. Comcast (CMCSA) ended its three-year battle over the NFL Network last May, when the Philadelphia-based cable giant signed a nine-year deal for considerably less than what the NFL wanted, according to media reports.

Disney may have won the Oscar battle, but the war is hardly over. The New York Times reported that Time Warner Cable (TWC), the second-largest cable cable company, told customers Saturday that its relationship with ABC "not at risk... yet."
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