Pay TV Bundling Challenged

TV sports
TV sports

In a lawsuit filed late yesterday in New York, Cablevision Systems Corp. (NYSE: CVC) is taking on Viacom Inc. (NASDAQ: VIAB) in a move that challenges the media company's practice of forcing cable providers to pay for dozens of channels that nobody wants as part of the basic cable offering. Ironically, when a consumer group filed a similar suit just a year ago, Cablevision sided with media companies and successfully beat back an effort to force the media companies to offer what's known as a la carte programming.

Cablevision made this comment about yesterday's filing:

The manner in which Viacom sells its programming is illegal, anti-consumer, and wrong. Viacom effectively forces Cablevision's customers to pay for and receive little-watched channels in order to get the channels they actually want. Viacom's abuse of its market power is not only illegal, but also prevents Cablevision from delivering the programming that its customers want and that competes with Viacom's less popular channels.

Viacom may only be a stalking horse for the rest of the media industry that includes big names the Walt Disney Co. (NYSE: DIS) and its Disney channels, ESPN channels, and ABC broadcast network; News Corp. (NASDAQ: NWSA), which owns the Fox broadcast network and other Fox channels; Time Warner Inc. (NYSE: TWX), which owns HBO, the Turner channels, and CNN; CBS Corp. (NYSE: CBS) which owns Showtime as well as its eponymous broadcast network; and Comcast Corp. (NASDAQ: CMCSA) which now controls NBC.

The signal issue here is what's called 'tying', a practice where programmers include that what Cablevision calls "less popular ancillary channels' along with "must-have networks." Cablevision cites Viacom's must-have networks as Nickelodeon, Comedy Central, and MTV, along with 14 of the ancillary channels that are forced on the cable operators.

Combined with other lawsuits and complaints about programmers' bundling requirements, the current spate of actions against the programmers could result in some relief for consumers, who are currently paying an average of $90 a month for cable or satellite channels that many don't want and don't watch.

Filed under: 24/7 Wall St. Wire, Cable Companies, Entertainment, Law, Satellite Tagged: CBS, CMCSA, CVC, DIS, featured, NWSA, TWX, VIA-B