Guest Commentary: Cablevision shouldn’t play ball on YES terms

Apr 29, 2002  •  Post A Comment

It has been reported that YES, the cable sports network, has hired Uber-lawyer and Microsoft slayer David Boies to sue Cablevision for alleged antitrust violations. If so, this development surely will rank as one of the most delicious ironies of an already irony-rich time.
For YES is, of course, the monopoly holder of local television rights to the New York Yankees baseball team. The Yankees themselves can be viewed as either a regional monopolistic franchisee of American League baseball or, along with the New York Mets, a duopoly franchisee of Major League Baseball. In the best tradition of monopolists everywhere, YES is trying to cram the highest license fee of any cable programming service anywhere down the throats of New York-area cable and satellite operators. And this is the truly wonderful part: YES is insisting that its service be carried on the basic tier and its exorbitant fee paid by each and every cable and satellite subscriber in the New York area, whether or not they actually want or watch the service.
Cablevision, alone among New York-area cable and satellite operators, is resisting YES’s outrageously anti-consumer demand. The company has agreed to carry YES, but only as a pay service for subscribers who actually want it. YES is insisting, however, that Cablevision withhold from consumers the 40 or more most popular programming services, including ABC, CBS, NBC, Fox, Fox News, CNN, MSNBC, CNBC, the History Channel, Discovery, Lifetime, MTV, USA, Bravo, A&E and many others, unless those consumers also buy YES.
Outrageous you say? Isn’t it in fact illegal under the antitrust laws for a monopolist to require consumers who want one product to buy another along with it? Haven’t the courts time after time over the years declared these so-called “tying” arrangements to be antitrust violations? And isn’t the consumer injury particularly flagrant in this case, where YES would consider itself wildly successful if, on average, only one out of every 20 cable viewers actually watched its service? Now remind me, which side of this dispute has hired David Boies?
Almost since the inception of cable, virtually every subscriber has been denied the ability to choose and pay for only those programming services they actually want. Instead, they must pay for dozens of channels they never watch and even those they hate. Wrestling fans must pay for ballet and ballet fans must pay for wrestling; music video devotees must pay for (multiple) classic movie channels and vice versa.
How did this happen, you ask? Well it could only have happened, of course, in a world in which the distributor, originally cable, was also a monopoly. Consumers simply had no choice. If they wanted to watch the Animal Channel, they would also have to buy, if not watch, the animals of WWF.
The monopoly cable operators for the most part saw this as a way to increase their profits. And perhaps in the beginning, it was providing an incentive-let’s be clear, a subsidy-for program developers to produce new cable-only products, an additional cost which could be passed on to consumers.
But the days when those benefits exceeded the costs to consumers, if they ever existed, are long over. If it wasn’t clear at the beginning where this path led, it should be clear now: The subsidies go to giant programming combines and giant cable companies. The tying arrangement reflected in the basic tier surely is an important reason cable rates have exceeded inflation for as long as anyone can remember. It is also part of the reason why the Yankees’ payroll is approaching $150 million, a figure which should shock the conscience of even the most devout market capitalist.
From the beginning, however, there have been prescient operators who saw that ultimately consumers would be far better served by so-called a la carte pricing and the ability to pick and choose just those channels they wanted. Cablevision was one of the few operators that was both smart enough and courageous enough to express these libertarian sentiments. Alas, Cablevision caved to the industry practice and, when it became the owner of its own local sports channels, took advantage of the same anti-consumer concept. Now it has the opportunity for redemption.
As an employee of a company that owns local broadcast stations, I have my own reasons for wanting to end the concept of the basic tier. By tying niche cable services to broadcast stations through the basic tier, cable has been successfully sucking the blood out of local stations and their networks and increasingly relegating high-cost programming exclusively to subscriber-based services. Evidence of this pernicious trend abounds but surely includes the proliferation of low-cost reality programming in prime time and NBC’s decision essentially to abandon the NBA and virtually all major sports other than the Olympics (which it can amortize over multiple cable networks). Some of this network proliferation and migration to pay services is properly the result of real consumer demand. But some of it is clearly the result of coercing consumers who would rather spend their hard-earned dollars on the programming they do watch (or something else altogether) and not on another 30 or 40 or 50 cable channels they rarely if ever watch.
Sen. McCain has it right. It is indeed “logical” to let people “select from a menu as to what they want to pay for and view.” Here’s hoping that Cablevision wins one for all the viewers in New York.
Greg Schmidt is VP, new development, and general counsel for LIN Television Corp.