A new antitrust lawsuit could set the table for cable companies to shake loose the bundles of channels being sold to them by sports content providers.
This week, Cablevision filed suit against Viacom in federal court in New York, charging that Viacom’s practice of “block booking” its channels constitutes a violation of antitrust law. Block booking refers to a tactic that is commonplace among sports media such as ESPN and Fox, too - bundling together packages of channels to sell to cable companies, rather than negotiating separate deals for each individual channel.
In effect, bundling forces the cable companies to buy ancillary channels such as the Longhorn Network and ESPN Classic if they want to have core offerings such as ESPN and ESPN2 as well. In its suit against Viacom, Cablevision is charging that it was coerced into purchasing the rights to less valuable properties such as VH1 Classic that had been tied to popular channels such as Comedy Central and MTV. In an appeal to the public, Cablevision contends that bundling runs counter to the best interests of consumers by diverting subscription fees towards less popular channels, thereby stifling potential competition.
While Viacom is couching the suit as an effort to redo a contract signed just two months ago, industry analysts are portraying Cablevision’s move as a longer-term play to take back some leverage in negotiations with content providers and rein in costs for cable programming. As Ryan Lawler of Tech Crunch points out, if Cablevision is successful, the suit would set a precedent for other bundling deals.
Why is this such a big deal for a media conglomerate like Disney, which owns the ESPN family of networks? The lavish spending of late on skyrocketing contracts for sports media rights has been driven in part by a bundling strategy.
If ESPN loses the ability to handcuff the LHN or the forthcoming SEC network to its more popular offerings, it eliminates a de facto subsidy for its products with more limited appeal. At the very least, that would call into question the viability of those ancillary networks.
@BlatantHomerism a monopolist has the power to secure above mkt pricing or to restrict output or limit quality below that of competitive mkt
@BlatantHomerism a relevant antitrust market is comprised of that group of goods or services that are economic substitutes for one another
@BlatantHomerism for this claim to prevail the defendant(s) will have to be found to have a monopoly in a relevant antitrust market
@BlatantHomerism Very possible it would kill LHN and conference-specific networks. That would have interesting realignment implications.
@BlatantHomerism Not sure implications for ESPN/FOX are that huge. Core networks will be picked up no matter what. (1/2)
Every time there is a content provider/cable company spat it is hailed as being the possible the action the alters the current landscape. In truth it seems a lot like the pre-WWI lining up of hostile powers against one another and we are all waiting for the random assassination of an unknown Archduke so set off the legal firestorm that sorts this all out. I really hope it is something like Cable One Fargo vs. The Rodeo Network.
@CtownManly above-market pricing seems possible. not sure about legal definition of limiting quality, but might be possible argument, no?
@CtownManly so, could there be a difference between, say, the sports programming market and the tv market in general?
@BringOnTheCats your second point is the bigger one to me. would make it hard for start-ups like lhn/sec network to get traction.
@bpdouglass thanks man. Not a lawyer, but it has always seemed like a completely anti-competitive practice to me
@BlatantHomerism possibly, yes. But most of the time these issues are fought on pricing rather than on output or quality.
@BlatantHomerism very tough to know how this issue will turn out without knowing what consumer data shows about switching/substitutability
@BlatantHomerism yes. Boundaries of rel. mkt. will be determined by evidence such as whether consumers switch 2 1 when prices 4 other go up
@BlatantHomerism Not an antitrust guy, so no idea on likelihood of success. But they brought it, so that says something, at least.
@BlatantHomerism Losing that leverage would kill ability to force carriage outside geographic area of interest. Would tap brakes on spending
@BlatantHomerism They all play in this grey area I can rarely grasp without help… nice review of a weird situation.
@BlatantHomerism could be either, depending on how the market is defined. Defendant will argue for broadest possible market...