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Disney's deal with Cablevision is good news for broadcasters [Updated]

March 7, 2010 |  8:24 pm

And the Oscar for biggest gamble goes to ... Walt Disney Co.'s ABC.

Risking political backlash and hits to its ratings, advertising revenue and public goodwill, Disney Chief Executive Bob Iger drew a line in the sand and appears to have triumphed in his battle with Cablevision Systems Corp., the New York cable operator with 3.1 million subscribers in the tri-state region.

IGER At issue were fees that Disney wanted Cablevision to pay for carrying WABC-TV New York. After two years of unsuccessful negotiations, Disney brass told Cablevision in January that it was prepared to pull the WABC signal and potentially deprive Cablevision subscribers of the 82nd annual Academy Awards. Early Sunday morning, it did just that. 

After some back-and-forth tough talk, Cablevision came back to the negotiating table and reached a tentative agreement, and the signal was back on about 15 minutes after the Oscars started. The only thing Cablevision subscribers missed was Neil Patrick Harris' painful musical number and a so-so monologue by Oscar co-hosts Alec Baldwin and Steve Martin.

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.

[Updated at 9:37 p.m.: Another person with knowledge of the talks countered that the price tag was closer to 27 cents to 37 cents. The deal may also factor in deals that Cablevision has for other Disney networks. Either way, Disney was able to boost its deal with Cablevision and bring in new money to ABC.]

Disney was said to have wanted about $1 per subscriber, a figure that Disney disputed. The $1 figure was probably a starting point that both sides knew wouldn't be accepted, just as the 25-cent counteroffer Cablevision is said to have pitched was also unrealistic.

The pact between ABC and Cablevision is in the same league as the deal that News Corp.'s Fox reached with Time Warner Cable earlier this year.

To companies that own broadcast networks and stations see developing a second revenue stream via carriage fees from distributors as key to their survival. Cable companies have been loath to pay such fees, but lately they end up having to play ball. Fair or not, it is often the cable company that gets blamed when a channel is dropped.

Cable companies say they shouldn't have to pay for local television stations because nonsubscribers can get them for free over the air. Broadcasters counter that cable companies charge their customers a fee to receive the local stations and they just want their fair cut.

Years ago, when broadcasters were first given the right by Congress to charge cable companies to carry their signals, the cable companies successfully said no way. So broadcasters created cable networks such as ESPN2, Home & Garden TV, FX and MSNBC. Cable operators paid for them and, as part of the deal, got to carry the  broadcast stations as well. It was a face-saving measure for the cable industry and a way for broadcasters to build new assets.

Almost 20 years later, it seems the cable industry might have been better off just paying for local TV stations. Disney, NBC and News Corp. built powerful cable programming units and gained leverage over distributors. Now they are in a position to get fees for their TV stations as well as for the networks they created when cable operators refused to pay fees for those very stations. Even though CBS does not have a lot of cable assets, it too has gotten cash for its television stations.

Ratings for broadcast television have been declining for more than a decade. But local stations still have a lot of clout with politicians and the markets they serve. Furthermore, the broadcast networks carry the big events that are must-see TV. 

These battles between broadcasters and cable companies are going to continue, but if the Fox-Time Warner Cable and Disney-Cablevision spats are any indication, the tide may be turning in favor of the broadcasters.

-- Joe Flint

Photo: Disney CEO Bob Iger. Credit: Matt Sayles / Associated Press.