Broadband Cable Association of Pennsylvania

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July 18, 2012

Several cable-TV operators have come out publicly supporting their satellite-TV rival DirecTV during its program-fee dispute with Viacom Inc., adding that they don't intend to ramp up marketing to capitalize on the situation.

For a week now, DirecTV's 20 million customers haven't been able to receive Viacom-owned cable channels such as MTV, Nickelodeon and Comedy Central, because of a dispute over fees. But in an unusual show of support, in recent days, Time Warner Cable Inc., Cox Communications Inc. and Mediacom Communications Corp. have each publicly backed DirecTV's position, presenting a unified front against steadily rising programming costs that are wracking the pay-TV industry.

In the past, some cable and satellite systems have swooped in to grab competitors' disgruntled customers during such blackouts-but those efforts are less common nowadays, executives say. It seems the pay-TV industry has more to gain from resisting price increases than from exploiting the troubles of a besieged rival distributor. "We're past the days of trying to take advantage of somebody else's shutdown to get a short-term gain in subscribers," said Tom Larsen, group vice president of legal and public affairs for Mediacom, a midsize cable operator with about one million subscribers. "The reality is that if we don't fix this long-term problem in the industry, we're all going to suffer."

Mediacom and Cox, for their part, say that even traditionally they haven't taken advantage of disputes in their marketing. But Mr. Larsen says many pay-TV distributors have realized that assisting programmers in their media wars during rate disputes with their competitors is just "giving the programmers more leverage over us." "Consumers are tired of these disputes and so are we," said Time Warner Cable in a statement Tuesday morning said. "We will continue to stand up for consumers against programmers' outrageously large price increases that serve no purpose other than to line network pockets at our customers' expense."

Viacom's channels were pulled off DirecTV systems just before midnight last Tuesday after the two sides failed to agree on program fee increases. DirecTV says Viacom wants a 30% increase whereas Viacom says it is looking for a fair deal to replace a seven-year old agreement. On Tuesday, both companies said they continue to talk, and DirecTV added that they are "making progress." DirecTV says it has seen some subscriber losses since the dispute, but so far the numbers are "very low." A spokesman added, "for the first time ever, we are seeing a huge number of our customers actually voicing support for us in our goal to keep programming costs as low as possible."

Not all rivals are passing up an opportunity. On its website, Dish Network Corp. is angling for DirecTV's subscribers with a "summer sales" advertisement featuring Nickelodeon's SpongeBob character. Dish says its marketing is simply advocating for the Dish brand. The dispute is hurting Viacom ratings. With the whole swath of DirecTV viewers cut off, the average number of people watching Nickelodeon since last Wednesday has fallen by more than 20%, according to Nielsen. In recent days Viacom has bought full-page newspaper ads to make its argument-and urge DirecTV subscribers to switch providers. For viewers, switching providers is no guarantee they won't run into similar disputes involving other providers and content companies.

The number of broadcast stations blacked out due to fee disputes has soared to 69 so far this year, almost five times the number in 2010, according to the American Television Alliance, an organization representing pay-TV providers and some independent programmers. That figure doesn't even include the rising number of disputes involving only cable channels, such as Viacom's. Since the end of June, Dish hasn't been carrying the AMC channel, whose hit shows include "The Walking Dead," or other channels owned by AMC Networks Inc. Dish blames AMC's demand for rate increases although AMC claims Dish is trying to gain leverage in an unrelated lawsuit.

Since the beginning of last week Time Warner Cable hasn't been carrying broadcast-TV signals of 15 Hearst Corp.-owned TV stations in 12 markets, affiliated variously with broadcast networks including NBC, ABC and CBS. Feuds have intensified as broadcast stations push to receive the same fees that cable channels have long gotten. Pay-TV providers, meanwhile, are increasingly angry that entertainment companies have made some shows available online-an issue cited by both DirecTV and Dish Network in their disputes. Pay-TV providers worry that their customers can cut the cord if shows are low cost or free on the Web.

Viacom pulled some of its shows off its websites when the DirecTV dispute began. But after clamor from consumer interest groups like Public Knowledge and critical remarks from Jon Stewart on Monday night's episode of "The Daily Show," Viacom reinstated full online episodes of "The Daily Show" and "The Colbert Report" on Tuesday. Viacom is still withholding from the Web several full episodes of "Jersey Shore." Viacom said it put the episodes back online to coincide with new episodes of the shows. "We hope this is helpful to our fans with DirecTV who have yet to switch to a cable/satellite provider that carries Comedy Central, Nickelodeon, MTV, BET and all our 26 networks." Wall Street Journal

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