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Bundling is a key issue in battle between Fox and Cablevision

October 27, 2010 | 10:11 am

Remember when you were a kid and you picked teams to play football or baseball? Sometimes, to get a really good player, you'd agree to take a couple of lesser players too. You didn't want those kids who couldn't run or catch well, but to get the superstar, you had little choice. Those were the rules of the playground.

Well, those rules of the playground are one of the issues keeping News Corp.'s Fox and Cablevision Systems Corp. from reaching a deal to put the Fox TV stations in New York and Philadelphia back in the homes of some 3 million Cablevision subscribers.

Although the talks are primarily focused on a deal for Cablevision to carry WNYW-TV and WWOR-TV New York and WXTF Philadelphia on its systems, a couple of cable channels — National Geographic Wild and Fox Business Network are involved as well.

Fox wants to package those two cable channels in a deal for its TV stations. Last year, as part of a one-year pact that would allow Cablevision to keep carrying the three TV stations, the cable operator agreed to pay to carry National Geographic Wild and Fox Business.

Now Fox wants to be paid to let Cablevision carry its local TV stations. It also wants Cablevision to keep carrying (and paynig for) the other two channels as well.

In the industry, this practice is known as bundling, and all the big media companies do it. Disney packages lots of channels together, as does Viacom and others. A cable operator who wants to just carry ESPN but not its spinoff channels will usually be quoted a price far greater than the $4-per-subscriber-per-month fee that ESPN on average costs and hence ends up agreeing to carry a bunch of channels in return for a lower price on ESPN.

One might question why a programmer would be willing to cut a deal that on the surface seems to be favorable to the distributor.

However, for the programmer it is the only way it can get smaller channels carried, and the bigger reach, the more potential ad dollars. The distributor usually takes the deal because — just like kids on the playground — if it means getting a star network then it's worth it.

But the problem is that bundling can leave smaller programmers in the lurch. Those networks that don't have the backing of an ESPN or a Fox behind them struggle to get distribution. One reason there has been so much consolidation in the media industry was because of how tough it was becoming for independent networks to get wide distribution.

Cablevision said in a filing to the Federal Communications Commission that it had pressed Fox to provide a stand-alone price for its TV stations, but the company resisted. When it finally did, the price tag was more than four times what Fox had previously offered, according to Cablevision.

The arguments for bundling are that it allows for more diverse programs. Perhaps, but it also allows for a lot of channels that don't have huge followings, to have distribution they otherwise might not deserve. The FCC is being pressured to take a more active role in programming disputes such as the one between Cablevision and Fox. Perhaps it can also look at bundling and determine what the pros and cons are and whether there needs to be a rethinking of the practice.

— Joe Flint

Related Posts:

Cablevision CEO wants sitdown with FCC

Fox and Cablevision take fight to FCC

FCC wants proof Fox and Cablevision are trying to make a deal

One reason Fox is unwilling to arbitrate its differences with Cablevision

 

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