Cablevision vs Scripps Fight Over Food Network/HGTV Could Last Weeks Longer

UPDATES Scripps Yanks Food Network & HGTV Off Cablevision in Tri-State

UPDATE: Cablevision emails me that reports of hundreds of thousands of abusive phone calls flooding their offices are “not correct. Customer interest in this issue has been modest and mostly manufactured by Scripps.”

Comments keep pouring in to Deadline Hollywood from furious Cablevision subscribers who want their Food Network and HGTV back on the channel lineup after the Scripps Networks’ programming went off this past weekend and stays off. (FYI, you missed a pretty good Iron Chef battle using vegetables from the White House garden. But you were spared watching Bobby Flay act like a jerk again. Tell me, why is the Food Network now the Bobby Flay Network? A little of that egomaniac goes a long way.) I hear hundreds of thousands of abusive phone calls have been flooding Cablevision since then. Now comes the flopsweat. No longer is Cablevision claiming it would “never, ever again” carry Scripps Networks’ programming. Instead, here’s their latest “We’re the victim” whiney statement about this mess:

“Cablevision offered Scripps the ability to continue delivering HGTV and Food Network to our customers while we negotiated a new agreement. This is common practice in the cable industry, and such an extension occurred in the recent dispute between Time Warner Cable and the Fox Network, and in Scripps’ own negotiations with Time Warner Cable. But instead, with virtually no warning, Scripps took the extraordinary step of flipping a switch and removing its channels from Cablevision – effectively holding their own viewers hostage in order to pursue a more than 200 percent fee increase from Cablevision and our customers. The channels where HGTV and Food Network appeared on Cablevision remain available, and if Scripps really cared about their viewers Scripps could put their programming back while we negotiate a new agreement. We believe it was irresponsible for Scripps to take the channels off, and it is irresponsible for them not to put the channels back on.”

Here is Scripps Networks’ statement claiming just the opposite:

Cablevision simply is not telling the truth. Scripps Networks has been trying to have productive negotiations with Cablevision for more than six months, but to no avail. Repeated requests to sit down together to discuss a fair market price for HGTV and Food Network have been rejected – even as recently as Sunday afternoon.

Cablevision is trying to characterize our rate increases as exorbitant and our negotiating strategies as unusual or unethical.

Yet, every other cable and satellite provider in the country has willingly and professionally renegotiated a fair market rate for the rights to carry these popular networks. That’s why both networks can still be seen on every other cable, satellite and telecom system in the country except Cablevision. Under our current contracts, Cablevision pays us about 25 cents per subscriber for the combination of Food Network and HGTV. That combined rate is substantially lower than rates earned by other, individual top 10 cable networks and considerably less than rates Cablevision pays itself for less popular networks that it owns.

True, short-term contract extensions are often granted, but only when the two parties are engaged in productive negotiations and there has been substantive agreement between them. Cablevision’s offer was take-it-or-leave-it, and would still make Food Network – a Top 10 network – one of the lowest paid channels on its lineup.

We regret deeply the interruption of service for Cablevision customers who rely on Food Network and HGTV quality programming, but we hope and trust that they understand that Cablevision can’t get something for nothing. Let’s be clear, we have been and remain ready and willing to negotiate. But until they will step forward in good faith, it’s Cablevision that’s holding their customers hostage.

But Pali Research media analyst Rich Greenfield this morning blames Cablevision and accuses the Dolans of “playing bully and kicking Food/HGTV out of the sandbox” because “its management are far more stubborn than anyone else in the multichannel industry”. Here’s more:

Cablevision and its management team simply do not follow the playbook of their peers and its behavior does not always appear rational to outsiders. While fighting Scripps is unexpected at first glance, as it has relatively inexpensive channels (even after the increases it was asking for), we suspect CVC is simply trying to draw a line in the sand, as it knows that retrans fees for broadcast will upwardly bias programming costs going forward. In turn, slowing cable network programming fee growth is critical for Cablevision, as well as its multichannel industry peers.

— We suspect Cablevision believes it is in a stronger position to fight a cable network cost increase, such as Scripps, based on its far higher (than industry peer) triple-play penetration (an estimated 65% as of end of Q3 2009) – the implication being, if a consumer has video/voice/data from Cablevision, switching multichannel providers simply because you lost Food Network and HGTV is a major pain/inconvenience.

— Assuming the programming battle lasts for an extended period of time (meaning weeks), we suspect CVC basic/digital sub losses could be modestly higher than expected in Q1 2010, albeit programming costs should benefit; whereas Scripps will suffer a drop in subscription and advertising fees (lower advertising due to a loss of distribution in the #1 DMA), with the outcome of its currently extended negotiation with TIme Warner critical to 2010 results (unclear if TWC is prepared to take the hard-line stance that Cablevision has, albeit we would love them to follow Cablevision’s lead).

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