‘Tis the season for saber rattling in cable. And this year AMC Networks is hearing a lot of that this week from small operators resisting a large price increase to extend a carriage deal that expires at year end.
AMC is still negotiating with the National Cable Television Cooperative, which represents 740 small and medium cable companies that collectively serve more than 4 million subscribers.
But one of its members, Alaska’s General Communications Inc. (GCI) told customers this week that it will drop AMC’s channels, as well as Univision, due to “substantial price increases.” It’s adding One World Sports, Discovery Family, and Outside Television to its line up.
The carriers may be suffering from sticker shock as AMC positions itself as much more valuable than it was in 2010, when the current contract was struck. Following a string of hits including Mad Men, The Walking Dead, and Better Call Saul it’s said to be looking for a price increase of at least 150%, although operators also would gain streaming and VOD rights.
A proposal to charge a fee based on all of a system’s subscribers, not just the ones who receive AMC channels, irked operators and was taken off the table weeks ago.
NCTC CEO Rich Fickle tells me that it’s “unlikely” his group will have an agreement with AMC ahead of midnight, January 1 although “I’d like to be pleasantly surprised.” He also calls this “the most challenging deal I’ve seen in four years” — leading nearly 100 of his member companies, with about 1 million subscribers, inclined to drop the channels.
AMC wants price hikes for all of its channels — including IFC, Sundance TV, WEtv and BBC America — and for operators to carry all of them. That troubles NCTC because although AMC has made big gains, the other channels “haven’t moved significantly,” Fickle says. AMC also wants the deal to run for about eight years, which the NCTC chief says is “really long” at a time when the industry is rapidly changing.
“Our portion of the industry can’t sustain this type of model, the way it’s been going,” he says. NCTC also has deals with other groups, including NBCUniversal, that expire at year end but it is drawing public attention to AMC because of its “extreme conditions.”
One of NCTC’s members is GCI — which has 112,900 basic video customers: It told subscribers this week that it’s through with AMC, adding that the programmer recently asked for a 200% price increase.
“We know Alaska Walking Dead fans will be disappointed that AMC’s sky-high rates prevent GCI from carrying the show on our traditional TV lineup,” VP of Content and Product Management Bob Ormberg says.
Still, the company noted that customers can continue to watch the zombie show “by other methods with GCI” including online via Netflix or Vudu (which charges about $2 an episode). The cable company is offering a $50 Visa gift card to users who have one of its TiVo set top boxes.
The offer is consistent with GCI’s effort to promote broadband, which is more lucrative than traditional TV.
“When people cut the cord, their data traffic jumps about 30%,” CEO Ron Duncan told GCI shareholders last month. “Our video strategy, unlike many of our cable peers, is very much to drive over the top [streaming] content to help our customers find ways to access the content they want over the top. And if that leads them to a decision to discontinue linear video, we’re okay with that.”
He added that in program negotiations “the opening offers are more than a 100% increase on the front end, and 10% to 15% per-year-over multiple years thereafter. And it’s totally unrealistic. That’s why linear video is going to be a very, very challenged product.”
AMC says that it has “long supported smaller cable operators, and the particular challenges and considerations that they face in the service of their markets. We will continue to endeavor to do everything we can to make them successful.”