Cablevision Systems Corporation (NYSE:CVC) has filed an anti-trust lawsuit against Viacom, Inc (NASDAQ:VIA) alleging it has been forced to carry numerous cable networks as a way to gain access to the company’s leading channels including Nickelodeon, MTV and Comedy Central.
Filed in Manhattan federal court, this lawsuit represents the ongoing argument regarding “bundling.” The comes from programmers, such as Viacom, selling their channels to cable and satellite companies through a package. This isn’t a new practice; it has been going for years and programmers believe this works better for them than a “a la carte” service, which has been supported by public interest groups, reported The New York Times.
This also results in cable customers ultimately paying more.
Cablevision said in a statement via Reuters, “Viacom effectively forces Cablevision’s customers to pay for and receive little-watched channels in order to get the channels they actually want.”
As for Viacom, it commented on the bundling with “these arrangements have been upheld by a number of federal courts and on appeal” or to use the the old adage, if it’s not broken why fix it?
The company added that it will “vigorously defend this transparent attempt by Cablevision to use the courts to renegotiate our existing two-month old agreement.”
This agreement refers to the long-term one made between the two companies back in December that had Cablevision Systems Corporation (NYSE:CVC) offering Viacom’s networks for an unknown amount.
In Tuesday’s lawsuit, Cablevision now wants to void this agreement and has asked that Viacom, Inc (NASDAQ:VIA) be banned from agreeing to comparable deals with networks referred to as “ancillary.” The company has said this includes less-watched channels such as CMT, MTV Hits, Nick Jr, Nicktoons, Palladia and VH1 Classic.
Other distributors such as DirecTV, Time Warner Cable and Charter have all come to support Cablevision’s lawsuit’s announcement, according to the The New York Times.
So what’s next?
This could turn into a long battle and it may not go Cablevision’s way.
In prior bundling cases, it did favor media companies. In November, the Supreme Court would not listen to a class-action bundling suit by consumer groups against numerous large media companies such as Comcast Corporation (NASDAQ:CMCSA), News Corp (NASDAQ:NWS) and Time Warner Inc. (NYSE:TWX). This followed the panel of judges from San Francisco’s U.S. 9th Circuit Court of Appeals; they took the entertainment industry’s side and said bundling is not in violation of antitrust laws.
For the Cablevision-Viacom suit, these companies are fighting a possible change to pay television’s business model. Advocates for a change to greater choices and options for subscribers to pay TV, such as media watchdog groups and consumer advocates, will keep an eye on this case.
John Bergmayer, a senior staff attorney at the consumer rights group, Public Knowledge, said to The Los Angeles Times, “Cable subscribers are often dismayed that they have to subscribe to an expensive bundle of hundreds of channels just to get access to the few they want. Many subscribers may not realize that large media conglomerates such as Viacom, Inc (NASDAQ:VIA) often force cable companies to include unpopular channels in subscriber bundles and to pay for them.”
Adding more fuel to this growing fire is that distributors are facing challenges from new and potentially less expensive “cablelike services” offered by companies through the Internet. Intel Corporation (NASDAQ:INTC) is working on this type of offering and other companies are expected to follow suit.
Cablevision Systems Corporation (NYSE:CVC) is currently trading up 0.46% at $15.36.