UPDATE, 11:07 AM: Viacom and others are starting to react to Cablevision’s surprising lawsuit. The programming company says that “at the request of distributors” Viacom and others “have long offered discounts to those who agree to provide additional network distribution.” The company says that these are “win-win and pro-consumer arrangements” that “have been upheld by a number of federal courts and on appeal.” Viacom adds that it will “vigorously defend this transparent attempt by Cablevision to use the courts to renegotiate our existing two month old agreement.”
But Time Warner Cable seems to be cheering for Cablevision. “We frequently have pointed out that there are serious problems with the current programming environment,” the company says. “We think this lawsuit raises important issues, and we look forward to their resolution in the courts.”
PREVIOUS, 8:57 AM: Hold on to your seats. Cablevision filed its antitrust suit in federal court in Manhattan, alleging that Viacom illegally tied deals to offer must-watch channels including Nickelodeon, MTV and Comedy Central to agreements for 14 smaller channels including Palladia, MTV Hits, and VH1 Classic. “The manner in which Viacom sells its programming is illegal, anti-consumer, and wrong,” Cablevision says. “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.” The suit alleges that Viacom threatened to “impose massive financial penalties unless Cablevision complied with Viacom’s demands.” Cablevision says the practice of selling channels as a package, instead of individually, is a “per se” tying arrangement that violates federal and New York state antitrust laws. It also charges that the practice violates laws against “block booking.” Cablevision wants the court to require Viacom to pay treble damages and legal fees, to bar the network owner from continuing to demand carriage deals, and to let the cable operator have separate deals for the “core” and “ancillary” networks while they negotiate new agreements.
If Cablevision prevails, then it could revolutionize the way pay TV services are sold: Distributors have long complained that programmers force them to lard their lineups with networks that few people watch but that raise everybody’s costs. The problem has become especially acute over the last few years as broadcasters have demanded rising retransmission consent payments, and major programmers have struck extravagant deals for sports rights with the expectation that they’ll recoup the outlays by raising the fees they charge distributors. Cablevision is one of the few operators that has advocated a la carte pricing.