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Cablevision sues Viacom over bundling of programming

February 26, 2013|By Joe Flint
(VH1 )

Cablevision Systems Corp., one of the nation's biggest pay-TV distributors, has filed a lawsuit against Viacom, parent of popular cable channels such as MTV, Nickelodeon and Comedy Central.

At issue is how Viacom sells its cable networks to pay-TV distributors. Cablevision said Viacom forces it to carry low-rated channels in return for access to its stronger networks.

“The manner in which Viacom sells its programming is illegal, anti-consumer, and wrong," Cablevision charged in a statement. Viacom, the company claimed, "effectively forces Cablevision’s customers to pay for and receive little-watched channels in order to get the channels they actually want."

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Cablevision went on to say that "Viacom’s abuse of its market power is not only illegal, but also prevents Cablevision from delivering the programming that its customers want and that compete with Viacom’s less popular channels.” The suit was filed in federal court in New York.

The suit comes just two months after Cablevision had signed a new wide-ranging distribution agreement with Viacom for its cable networks.

The legal battle will be closely watched by the media industry. The practice of bundling, as it is known in the trade, has become an increasing source of tension between pay-TV distributors such as Cablevision and programmers such as Viacom.

Typically, a programmer will offer some sort of discount on popular channels in return for carrying channels with smaller audiences. Walt Disney Co. and News Corp., both of which own lots of cable channels, also package networks in this fashion.

But as programming costs have risen -- in large part because of sports -- distributors are becoming less willing to pay for channels that are struggling to find an audience.

In its suit, Cablevision said Viacom forced it to carry 14 low-rated channels in return for the right to carry Nickelodeon, Comedy Central and MTV. Most of the channels Cablevision said it was illegally forced to carry are spinoff networks such as Nicktoons from Nickelodeon, VH1 Soul from VH1 and MTV Jams from MTV. Cablevision also said it was forced to carry Logo, Viacom's channel aimed at gays, lesbians and transgenders.

Cablevision said such "block booking" violates the Donnelly Act in New York state, "which parallels federal antitrust laws."

Viacom responded in a statement that it and other programmers have "long offered discounts to those who agree to provide additional network distribution." Such agreements, Viacom said, are "win-win and pro-consumer arrangements." Viacom added that it will "vigorously defend this transparent attempt by Cablevision to use the courts to renegotiate our existing two month old agreement."

ALSO:

Supreme Court declines to hear bundling case

Media giants score victory against foes of bundling

Follow Joe Flint on Twitter @JBFlint.

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