Disney vs. Time Warner Cable: Yet Another Battle That May Take Away Your Favorite Channels or Raise Your Bill
by Gary Susman, posted Aug 7th 2010 6:00PM
Playing this week in summer reruns: another battle between a cable network and a service provider that threatens to either take away your favorite channels or increase your monthly cable bill.
There have been several such battles this year. The latest is between Disney (parent company to such widely-viewed channels as ABC, the Disney Channel and ESPN) and Time Warner Cable, the nation's second-largest service provider. Like other programmers in those earlier squabbles, Disney is negotiating for increased carriage fees, the per-subscriber amounts that the service provider pays to carry each channel.
If no agreement is reached by Sept. 2, Time Warner Cable's 14.6 million subscribers in 28 states may be deprived of several channels' worth of popular shows, including 'Modern Family,' 'Hannah Montana' and 'SportsCenter.' Of course, if a deal is reached, then the resulting increase will be passed on to consumers via their cable bills. Kinda makes it hard to pick a side, doesn't it?
The Disney-TWC tug-of-war (best described in this Los Angeles Times article) echoes similar spats earlier this year over proposed carriage fee increases, including one between TWC and Fox, one between Cablevision and Scripps (parent company of Food Network and HGTV), one between Cablevision and Disney, and one between The Weather Channel and Dish Network.
In each case, the programmer threatened to pull the plug on those channels unless the service provider paid up. In fact, Food Network and HGTV briefly went dark on Cablevision, and so did ABC, with the impasse going unresolved right up to the beginning of the Oscars, sABC' most highly-rated program of the year. TWC and Fox resolved their dispute just in time to keep New Year's college football games on the air.
Why are all the channels suddenly asking for more money? In part, it's because one of their two revenue streams, the advertising market, has been hit hard during the financial crisis of the past couple of years, so they're trying to make up the difference via the other stream, carriage fees.
This wouldn't have been possible 18 years ago, when the current FCC regulations governing cable retransmission of programming were put into place. Back then, cable operators held most of the power, but now that there's more market competition from satellite and phone companies, programmers can safely negotiate for higher fees.
Disney's public relations move during the current battle has been to create a website called IHaveChoices.com, which reminds TWC subscribers that they can always switch to such providers as AT&T's U-Verse, Verizon's FIOS, Dish, or DirecTV.
Or if you're a TWC subscriber in a market where Disney-owned ABC affiliates may go dark (that is, New York, Los Angeles, Toledo, or Raleigh-Durham-Fayetteville), you can also switch to the free, over-the-air broadcast signal (remember that?) to get ABC (though you may still need a converter box to decode the digital signal).
Time Warner Cable has its own consumer PR site, whose very name urges customers to RollOverOrGetTough. It's the same site the company rolled out last winter during the Fox fight, and it doesn't mention Disney by name, though it does urge customers to lobby against higher carriage costs across the board. After all, once the Disney dispute is settled, TWC may need this site again for another struggle against a different network.
Websites aside, both media giants say they don't want to negotiate this battle in public, which is why neither side has revealed just how much more Disney is asking for. But Disney already gets a large chunk of your cable bill. Most cable channels charge service providers nickels and dimes per subscriber per month, but ESPN averages $4.10 per subscriber (the nation's biggest carriage fee). The Disney Channel and ESPN2 earn more than 50 cents per subscriber.
It's not clear how much Disney wants Time Warner to pay for ABC, but it's probably in line with what Fox was asking, which is a dollar per subscriber. (What Fox and TWC actually agreed to was not disclosed by either side; same with Disney and Cablevision.)
The two sides can't even agree on how a raise in rates will impact consumers. On IHaveChoices.com, Disney claims carriage fees account for less than a third of your cable bill, while TWC says at RollOverOrGetTough that it's 40 percent. TWC also says it spends 54 percent of its revenue on operations, leaving just 6 percent as profit. Still, that's no small chunk of change. The company reported this week that profits were up 8.2 percent for the quarter, to $342 million, despite its subscriber base remaining flat. If TWC subscribers' bills go up even a penny per month, that's another $1.75 million grossed annually.
Regardless of how the Disney-TWC dust-up shakes out, it seems clear that Disney and other programmers won't feel shy about trying to raise carriage fees again, with TWC or another provider, in the near future -- with your favorite shows being held hostage until such negotiations are resolved. Since March, the service providers have been trying to keep such battles from recurring by lobbying the FCC to impose tighter restrictions on the broadcasters than the ones put in place 18 years ago, when the balance of power favored the cable companies over the programmers. The broadcasters, of course, are lobbying to keep the current rules in place.
By the way, earlier this week, the nation's largest cable provider, Comcast, quietly signed a new carriage deal with CBS and its cable siblings Showtime, College Sports Network and the Smithsonian Network. The deal locks in the channels' carriage agreements with Comcast for the next 10 years and expands their on-demand offerings with the service provider. Somehow, the parties managed to strike the deal without squabbling in public or holding a gun to viewers' favorite programs.
•Follow Gary Susman on Twitter @garysusman.