* Cablevision says forced to buy channels it did not want
* Viacom calls lawsuit hypocritical
By Jonathan Stempel
NEW YORK, March 7 Cablevision Systems Corp
is claiming that Viacom Inc sought to extract a
nearly $1 billion penalty if it refused to pay for low-rated
channels it did not want in order to access more popular
channels such as Comedy Central, MTV and Nickelodeon.
The allegation was made in an antitrust lawsuit filed on
Feb. 26, but first made public on Thursday. The dollar figure
was blacked out in the public version of Cablevision's
complaint, but Viacom confirmed the amount in a statement.
Cablevision had in December signed what it now calls a
"coercive" long-term agreement to carry Viacom networks,
estimated to cost more than $115 million a year in fees.
In its complaint, Cablevision said Viacom "strong-armed" it
into distributing 14 lesser channels known as "Suite Networks,"
as a condition of having access to Viacom's most popular
channels, or else face a nearly $1 billion "penalty."
Cablevision said this "bundling" arrangement, also known as
a "tying agreement," sapped bandwidth it could have used for
other channels from other programmers.
Viacom called the lawsuit by Bethpage, New York-based
Cablevision "nothing more than a hypocritical attempt" to void
that transaction, and the $1 billion figure "rhetorical math"
that has nothing to do with actual deal terms.
"Cablevision received a significant discount on a package of
networks that account for nearly 20 percent of the total viewing
audience," New York-based Viacom said. "Now they want the lower
price without the obligation to offer our networks to their
customers. For Cablevision, it's 'do as we say and not as we do'
- an arrogant approach all too familiar to its customers."
Industry experts are watching to see whether the case breaks
new ground in the debate over bundling.
This is where programmers such as Viacom sell packages of
channels to distributors such as Cablevision, rather than sell
only channels that the distributors want.
Bundling can help programmers boost profit, but can also
result in viewers paying higher cable fees as distributors pass
on the extra costs.
James Dolan, Cablevision's chief executive, has in recent
years decided to temporarily drop channels rather than accept
high carriage fee increases, including channels owned by Tribune
Co and News Corp's Fox.
Other distributors, including Time Warner Cable Inc
and Dish Network Corp, have also objected to high
Charles Ergen, Dish's billionaire chairman, as well as
Cablevision founder Charles Dolan, have advocated an "a la
carte" model to let consumers choose, and drop, whichever
channels they want.
"ALL ABOUT THE BUNDLE"
Cablevision said in its complaint that during negotiations
on the long-term carriage agreement, Samantha Cooper, a Viacom
senior vice president for content, refused to consider any
agreement to let Cablevision take only eight "core" channels,
which also include BET, MTV2, Spike, TV Land and VH1.
"Ms. Cooper emphasized that there could be no deal, from
Viacom's perspective, that did not include the Suite networks,
and that 'it's all about the bundle' and has 'always been about
the bundle,'" it said.
Cablevision said the Suite Networks channels are Centric,
CMT, CMT Pure Country, Logo, MTV Hits, MTV Jams, Nick 2, Nick
Jr., Nicktoons, Palladia, TeenNick, Tr3s, VH1 Classic, and VH1
Soul, and that Viacom lists BET Gospel as a Suite Network.
It also said that absent bundling, it could have room to
launch Magic Johnson Enterprises' ASPiRE, GMC, Me-TV, Ovation,
Retirement Living TV, and foreign language channels that could
be particularly appealing in the New York City area.
SNL Kagan, which tracks cable fees, has estimated that
Cablevision pays $38.8 million a year for the 14 channels it
does not want, and $76.8 million a year for the eight it wants.
The lawsuit seeks to void the December agreement, ban Viacom
from ever requiring Cablevision to accept channels it does not
want in order to carry channels it wants, and triple damages.
The case is Cablevision Systems Corp et al. v. Viacom
International Inc et al., U.S. District Court, Southern District
of New York, 13-01278.