Cablevision Complaint Claims Viacom Abused Market Power Over ‘Commercially Critical’ Networks

Cablevision said Viacom abused its market power over access to “commercially critical networks” to force the cable company to license and distribute over scarce bandwidth some dozen other Viacom networks “that many Cablevision subscribers do not watch and for which Cablevision would prefer to substitute competing networks,” the complaint said. “Viacom’s market power stems from its exclusive right to distribute commercially critical networks,” like Nickelodeon and Comedy Central, it said. These networks are commercially critical “because of the popularity of programming shown on each[,] as well as each network’s brand image and reputation among subscribers,” it said. Cablevision said it would be severely disadvantaged “if Viacom withheld any, or all, of its ’tying networks’ from Cablevision for a significant period of time."

It would be very difficult to get a contract modified on that basis, said Scott Flick, a Pillsbury Winthrop broadcast lawyer, who doesn’t represent either company. They're claiming they signed a contract of adhesion, where “one side has so much negotiating power that the other side basically just had to sign what was put in front of them,” he said. “You get the impression that the deal that was negotiated is one that Cablevision’s not happy with at the end of the day."

Cablevision said that in late 2012, it attempted to negotiate an agreement with Viacom under which Cablevision would distribute only Viacom’s “core networks,” including all the tying networks, but no “suite networks,” like Logo, VH1 Soul and Nick Jr. Cablevision said this negotiation was rejected and Viacom sought to penalize it monetarily for distributing alternatives to the suite networks. That amount was redacted in the complaint, however, Cablevision said the figure “exceeds Cablevision’s entire 2013 programming budget ... and on information and belief exceeds Viacom’s advertising revenues from Cablevision’s carriage of the Suite Networks.” Viacom’s coercive tactics left Cablevision with only one viable economic choice -- “to accept a deal under which Cablevision would continue to carry both the core networks (which Cablevision wants to distribute) and the suite networks (which Cablevision wishes to replace with alternative networks),” Cablevision said.

Viacom said Cablevision is “crying foul” over a standard business practice “that expands choice and lowers cost for consumers.” Cablevision received “significant discount on a package of networks that account for nearly 20 percent of the total viewing audience,” it said in a statement (http://bit.ly/Zv8LzY). “Now they want the lower price without the obligation to offer our networks to their customers."

Signing the agreement could make it difficult for Cablevision to find favor in court, Flick said. Now “there is a contract in place that they're effectively trying to modify or break, which is, I think, a more difficult task than saying ’someone isn’t negotiating fairly with me,'” he said. Cablevision’s request to have the agreement voided seems like buyer’s remorse, he added.

While there is a tying problem in the industry, “I don’t agree with Cablevision’s version of it,” said Robert Gessner, Massillon Cable TV president. “It’s like saying The New York Times can’t sell news, weather, sports, the ’society’ column and the comics altogether.” But “it would be another matter if you tried to buy The New York Times and you found The Wall Street Journal was strapped to it and you had to buy both.” Viacom should be able to market their package and require distributors to distribute it how Viacom wants, he added: “I'm not sure I'd want to try to make a case out of saying that the Viacom products are illegally tied to other Viacom products."

Cablevision also said there are other networks, like Retirement Living TV and GMC, that it would consider adding to its lineup if it isn’t required to distribute Viacom’s suite networks.

Determining whether programming is “commercially critical” could be tricky for a court, Flick said. “I'm not sure if we've established yet if there’s such a thing as video programming you can’t live without,” he said. “A court would be trying to determine what is something that is so close to being just vital to continuing your business that the entity providing it has complete and total market power,” he said. This aspect could make Viacom’s case just as strong as Cablevision’s, Gessner said. If Viacom feels it has developed strong brands, they can say “you have to take the other stuff that goes with them,” he said. Cablevision is sort of agreeing that Viacom created critically important programs that it can’t do without to the point it buys the other networks, he added.

Charter supports Cablevision’s efforts “to rein in programming costs,” a spokeswoman said in a statement. “If programmers force us to purchase less desirable programming in order to secure ‘must have’ programming, programmers can unreasonably increase costs significantly for us and our customers while blocking other market participants and new entrants.” Lawsuits like this “send a clear message to programmers that unlawful and irresponsible market tactics will not be tolerated,” she said. It is “in the best interests of our customers for programmers to offer meaningful unbundled options,” a Cox spokeswoman said.