Don't be confused: Cablevision's anti-trust suit decrying the evils of "anti-consumer" bundling by Viacom, which have pushed cable-bills up oh-so-high, has nothing to do with the frustrations consumers have with cable bundling. As it explains in a press release announcing the suit, Cablevision wants to carry eight of Viacom's "must-have" networks, like MTV, Comedy Central, and Nickelodeon, but not its 14 "ancillary" channels, like MTV Tr3s, CMT, and Teen Nick. It's a familiar complaint from people who would like the option to subscribe to cable channels a la carte rather than buy big bundles, and Cablevision even frames its suit in those terms: "Viacom effectively forces Cablevision's customers to pay for and receive little-watched channels in order to get the channels they actually want." But this suit, at least how Cablevision has described it, isn't about getting closer to a la carte. Cablevision, faced with rising programming costs, wants to sell a better bundle, not get out of the bundling business.
While these annoyed cable providers make this sound like a crusade to protect consumers from ever-increasing cable prices, the move actually serves to defend their bottom lines. Programming costs from place like Viacom are resulting in losses for the pay-TV guys, as I explained earlier this month. These bundles,—in part because of these little unnecessary channels, but also because of big players like ESPN—have started costing too much for the cable companies. Dish, for example, reported an earnings miss this quarter because of programming costs, it claimed; those same channel package costs have plagued Cablevision as well. Meanwhile to make up for these losses, the content owners are charging more and more for stuff.
Those same contracts that Cablevision signed with Viacom also prevent it from selling Viacom's channels a la carte. And Cablevision's suit doesn't mention anything about the unfairness of that bundling behavior. So, while Cablevision would like to stop paying for MTV Tr3s, it has no plan to let you stop paying for the Nickelodeon you don't watch. Any benefit their suit would give to consumers comes at the end of a long logic chain. "Forcing customers such as Cablevision to take Viacom networks instead of competing networks, in turn, hurts consumers because they get less for what they pay for video services." (It's not really clear what that final nonsensical phrase means; customers don't get less for what they pay, but are in fact paying more for things they don't want.)
And given the problems Cablevision and the rest of TV providers are facing — programming costs rising faster than they can increase subscriber fees — it's difficult to imagine how the savings created by this would trickle down lower cable bills. The sort of debundling sought for in this suit would be a "tectonic shift" for the cable business. But watching your favorite TV will not get any less expensive.
Update 3:30 p.m.: Other pay-TV companies have since come out with their support of the lawsuit, because, as explained above, they too are being squeezed by the higher programming costs. "There’s no question that the current all-or-nothing system dictated by programmers is completely broken," Dish said in a statement to the Los Angeles Times, calling the price hikes shameful. Time Warner Cable also came out on the side of Cablevision, albeit with a less forceful remark, saying "raises important issues, and we look forward to their resolution in the courts."
On the other side of the battle, however, Viacom is calling the suit a "transparent attempt by Cablevision to use the courts to renegotiate our existing two month old agreement," according to a statement obtained by AllthingsD's Peter Kafka. At the end of 2012 Cablevision renegotiated its contract with Viacom, which included all those peripheral channels it now realizes it can't afford. This is a ploy to get a better contract, argues Viacom in this full statement:
At the request of distributors, Viacom and other programmers have long offered discounts to those who agree to provide additional network distribution. Many distributors take advantage of these win-win and pro-consumer arrangements. Reflecting the highly competitive cable programming business, these arrangements have been upheld by a number of federal courts and on appeal. Viacom will vigorously defend this transparent attempt by Cablevision to use the courts to renegotiate our existing two month old agreement.