Cablevision Systems Corporation
) recently filed an antitrust law suit against media giant
) for forcing the former to take up bundled TV channels,
inclusive of less popular networks like CMT, MTV Hits, Nick Jr,
Nicktoons, Palladia and VH1 Classic. The case is under wraps and
not available for public viewing.
With respect to the litigation, Viacom believes that these
Pay-TV operators actually gain from such deals as they get more
channels at low cost.
At the end of last year, Cablevision and Viacom entered into a
long-term agreement, under which the former will carry Viacom's
network for an undisclosed amount. However, we believe that
mounting programming costs and failure to strike a better bargain
with Viacom has forced Cablevision to file such litigation
against the media giant.
Generally, most media companies follow the similar business
pattern of bundling their low rated channels with other popular
channels, hence inflating the channel package rates.
Such harmful practices have not only increased programming
expenses of cable and satellite TV operators but at the same
time, have also affected margins in a big way. Moreover, the
numbers of channel blackouts have also increased over the last
year, resulting from disagreement between media partners and
cable and satellite operators.
) - the largest satellite TV operator in the U.S - failed to
renew its contract with Viacom as the former was demanding a huge
hike in fees, which resulted in blackout of channels for nine
days. Finally, DIRECTV resumed its channel service by renewing
the contract at a 20% higher rate.
Likewise, in 2012, higher demand for fees had forced
Time Warner Cable Inc
) to drop Ovation network while Dish Network Corp. too dropped
AMC Network channels from their popular program lists.
So we believe that such serious allegation brought by
Cablevision may raise big questions over the business model
followed by the media companies.
Currently, Cablevision has a Zacks Rank #4 (Sell).
CABLEVISION SYS (CVC): Free Stock Analysis
DIRECTV (DTV): Free Stock Analysis Report
TIME WARNER CAB (TWC): Free Stock Analysis
VIACOM INC-B (VIAB): Free Stock Analysis
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