Investors and consumer groups will be watching for just such a possibility following U.S. District Court decision Friday to let Cablevision pursue an antitrust claim against Viacom. More than a year ago the cable company charged that it was improperly forced to carry 14 channels it didn’t want (including Palladia and Tr3s) in order to offer eight that it did. Viacom asked the court to dismiss the complaint, saying that Cablevision failed to make a prima facie case that its bundles violated antitrust law. But Judge Laura Swain said there were enough facts to “support plausibly an inference of anticompetitive effects.” Although far from a definitive ruling, the decision to let the case proceed “was not a given, so it was a victory for Cablevision,” Guggenheim Partners’ Paul Gallant says today.
If Cablevision prevails, the case could rock Big Media. Most of the top content companies’ business models depend on their ability to require pay TV distributors and their customers to pay for channels they don’t want. If the court says that’s illegal, then “that could feed into the nascent Telecom Act rewrite — or perhaps a narrower bill updating the 1992 Cable Act — in an unwelcome way for content companies,” Gallant says.
But the case could take more than a year to approach a verdict. Viacom appears ready to fight: Cablevision wants to “renege on a long-term business agreement, using arguments directly contrary to positions it has taken in other cases and to its own business practices,” the company says. It adds that it’s confident that “Cablevision will fail to prove the facts required to prevail in their case.” CEO Philippe Dauman said last year, “I guess their theory would be: ‘We got the discount, we got three suits for the price of two. Now we just want one suit for the same price.’ … The bottom line is, I guess the lawyers will get rich on this.”
The cable company, for its part, calls the channel bundling “illegal, anti-consumer, and wrong.” The judge will set a schedule for the case on August 1.