When cable networks and distributors fail to agree on terms for a new contract, it often comes down to who can endure the most pain from a blackout that could leave subscribers without their favorite shows.
Pulling together our feature today on the top 10 worst programming disputes of all time brought to mind an episode of The West Wing, where Sam Seaborn (Rob Lowe) warned an oil executive preparing to purchase an outmoded tanker that it'd be smarter to buy a modern ship in order to avoid the type of consumer backlash that occurred after the Exxon Valdez spill. "We've got PR firms for PR problems," the executive responded. Just as an oil executive may risk an environmental disaster to cut costs, some of the programmers and distributors involved in the worst disputes of all time have shown they are willing to risk losing subscribers from a blackout in order to negotiate a long-term contract at the right price.
Carriage deals are no longer negotiated behind closed doors. Cable programmers ranging from AMC to Scripps scrawl messages across the screen during their most popular shows that warn of pending blackouts when their contracts are up for renewal, and broadcasters do the same as they negotiate retransmission-consent deals with pay TV providers.
Using the threat of a blackout has become a key negotiating tactic for both programmers and distributors, and PR strategy is now as essential as a skilled affiliate sales team. Take a look back at last year's Fox Networks – DirecTV (Nasdaq: DTV) battle, No. 10 on our list of the worst programming disputes. Both sides launched blogs to spin viewers, and DirecTV CEO Mike White appeared on camera to communicate directly to subscribers. Among the communications pros who advised DirecTV during the dispute with Fox was Tom Tyrer, the former SVP of communications at Fox Networks.
The DirecTV – Fox dispute was one of the ugliest the industry has seen, with Kurt Sutter, the producer of FX hit Sons of Anarchy, ridiculing DirecTV in a profanity-laced blog. While both sides in the dispute riled subscribers, they managed to reach a deal without blacking out DirecTV's 20 million subscribers.
Fans of Spongebob Squarepants, The Daily Show and other Viacom (NYSE: VIA) programs weren't as fortunate last July, when Viacom's blackout of DirecTV subscribers ran for nine days. Time Warner Cable (NYSE: TWC) subscribers who are fans of the Knicks, Rangers, Islanders or Sabres saw a blackout last year of MSG that ran for nearly seven weeks. But that pales in comparison to the blackout of NBC affiliate KRIS-TV in Corpus Christi, Texas, which Time Warner Cable subscribers endured for nearly five months.
Some wild disputes are featured today, including the heat NFL took from former Sen. John Kerry (D-Mass.) when it attempted to relegate the historic Patriots – Giants game in December 2009 to NFL Network. And we remember the time Cablevision (NYSE: CVC) stuck it to Classic Sports Network by bringing Muhammad Ali to the NCTA convention to announce that it would launch American Sports Classics, and what happened when Time Warner Inc. (NYSE: TWX) tried to protect CNN by blocking Fox News Channel from its New York City cable system.
While the number of blackouts of cable networks and TV stations continues to increase each year, and city mayors and members of Congress continue to scold the industry when blackouts occur, no new laws have been passed that would make it difficult to use the threat of blackouts as leverage in contract negotiations. But it's worth noting that small cable operators, telcos and satellite providers are lobbying Congress and the FCC to reform retransmission-consent rules. And regulators have taken a more active role in some disputes, at least those involving Comcast (Nasdaq: CMCSA), which has been forced in the last year to give better channel placement to Bloomberg TV and to widen its distribution of Tennis Channel.
There are several other skirmishes that could've also made our list of the worst programming disputes, including the six-week blackout of LIN-TV stations on Mediacom's cable systems in 2011. With broadcasters like CBS Corp. (NYSE: CBS) chief Les Moonves predicting that he'll rake in $1 billion in annual retransmission consent revenue by 2017 or sooner, and new regional sports networks launching each year, we may have to update our list soon. -Steve
Check out our special report here