Cablevision Says it Faced $1B Fee to Avoid Viacom Bundling

By FOXBusiness

Cablevision (NYSE:CVC) said it was facing a penalty of more than $1 billion if it refused to carry   Viacom’s (NASDAQ:VIAB) lesser-watched networks under a deal it agreed to at the end of last year.

The cable television and broadband provider filed a lawsuit last week alleging Viacom broke antitrust rules by bundling its more popular channels, like Nickelodeon and MTV, with 14 less-popular networks. Cablevision had said it was threatened with a large penalty if it chose to carry only certain networks.

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On Thursday, the company released a copy of the antitrust lawsuit and publicly disclosed the size of the penalty. The dollar figure, along with some other details, was blacked out in the released copy of the lawsuit.

Cablevision said in the complaint that Viacom “strong-armed” the company into carrying more than just Viacom’s “core networks,” including BET, Comedy Central, MTV, MTV2, Nickelodeon, Spike TV, TV Land and VH1. It added that given the choice, it had to carry all of the networks because a “substantial number of subscribers would likely abandon (or refuse to consider) Cablevision” if it did not offer Viacom’s core channels.

The operator noted that the additional charge would be equivalent to more than its “entire 2013 programming budget.”

In a statement, Viacom called the $1 billion penalty “rhetorical math” and an “inflated, irrelevant number manufactured to create artificial sticker shock.”

Cablevision also alleged in the complaint that during negotiations, Viacom said it would only consider a proposal that included all of the content provider’s offerings. Viacom told Cablevision it would have to pay more to carry just the four top networks, the lawsuit claimed.

“Cablevision received significant discount on a package of networks that account for nearly 20% of the total viewing audience,” Viacom said. “Now they want the lower price without the obligation to offer our networks to their customers.”

The lawsuit by Cablevision reflects a belief in the cable and satellite industry that content providers bundle channels together in negotiations to discourage operators from dropping less-popular networks. Distributors like Cablevision have said the practice inflates programming costs.