For two months now, about 900,000 households rural America haven’t been able to watch Viacom’s Nickelodeon, MTV, TV Land or Comedy Central, as a result of a blackout of the channels by some 60 small cable operators affiliated with the National Cable Television Cooperative (NCTC). So far, there is little evidence any more than a handful of the households care.
After bracing to lose as many as a 10th of their customers, the operators have lost less than 2% of their collective subscribers, according to an industry group that represents the operators.
“Quite frankly, I can’t say I did notice,” David Smith told iMarketReports.com. The 64-year-old tire-shop owner in Edinboro, PA, is a subscriber to the local company, Coaxial Cable Television Corp. He said he hadn’t watched Viacom channels in at least a dozen years.
Viacom isn’t worried either, saying it expects “no financial impact” from losing what is only about 1% of total pay-TV households. As a result, with the cable operators unhappy about the price Viacom wants for the right to carry the channels, executives say the blackout is likely to be permanent. Several have replaced the Viacom channels with others.
The markets in the current dispute are mostly rural and suburban, in states including Oklahoma, Minnesota, Iowa and Idaho, where Viacom’s portfolio of young-skewing channels with edgy programming popular in urban centers may not carry as much sway. While Comedy Central features personalities including Jon Stewart and Stephen Colbert, executives at two of the small cable companies said customers were more unhappy about missing “I Love Lucy” reruns on TV Land, said the story.
There are signs that the dispute, and the lack of viewer reaction, could embolden other operators to take similar action. Jeff Janssen, vice president of sales and marketing at ImOn Communications, a Cedar Rapids, Iowa, cable company that no longer has Viacom programming, said he had been fielding calls from other larger cable operators who have been inquiring about the results of the drop.
“I think there are going to be a significant number of larger cable operators that may follow suit” with other major programmers, Janssen told iMarketReports.
The operators in the dispute–the biggest of which is Cable One, owned by Graham Holdings, formerly the Washington Post Co.–for years have bought programming through NCTC. But when the NCTC reached its most recent agreement in April with Viacom, many operators thought the terms too onerous and declined to sign on.
Many calculated that they would have lost more customers by increasing cable rates than by dropping the Viacom channels. Smaller cable operators already pay higher per-subscriber fees than big operators, such as Comcast, which have the leverage to negotiate volume discounts. Cable executives say the new Viacom agreement would have meant paying more than a 100% increase from 2013 rates over the course of the five-year deal.
“We’re happy with our agreement with the NCTC,” said Viacom spokesman Mark Jafar. “It is unsurprising to us that the level of switching has been relatively low” since in most of the markets customers don’t have another broadband option than their local cable operator. Even if they wanted to switch TV providers, Jafar said, they would have to keep the same Internet provider–an “enormous hurdle” to customers switching.
NCTC Chief Executive Rich Fickle said that a lot of the operators surveyed customers ahead of time to estimate potential subscriber losses: “It’s really kind of unprecedented…it’s not really a dispute from their standpoint but a permanent decision.”
“My customers have proven to me that they are OK without it,” said Chris Lovell, general manager of Coaxial Cable, which serves about 3,000 customers. The Pennsylvania company has replaced the programming with high-definition channels such as Lifetime and History.
Since Coaxial Cable dropped Viacom, only 31 customers–about 1% of its customer base–have dropped their TV services.
While the two sides appear to be willing to move on without each other, one wrinkle in the dispute has caught regulators’ eyes: Viacom has blocked the full episodes of programs such as “The Daily Show with Jon Stewart” on its websites for the broadband customers of the cable operators who have dropped its TV channels. Margo Davenport, a lawyer in the FCC’s media bureau, said the move is “something we’re concerned about.”
The American Cable Association, which represents the smaller operators, says Viacom’s moves violate the spirit of net neutrality.
RBR-TVBR observation: This is a really good example of what happens when regulators allow mega media MVPD consolidations. The volume pricing is cheaper from the networks to the Comcasts of this world and more expensive for the smaller NCTC companies. Typically, rural subscribers have less money to spend than large market subscribers, so the local cable providers have to be careful about not signing any deals that will raise monthly bills. The disparity will only get worse when Comcast merges with Time Warner Cable and AT&T with DirecTV. Nevertheless, the marketplace will decide. There are so many networks out there today that smaller cable companies can choose (at least for now) lower-priced networks to carry the same type of programming, as we saw here in this article.