Public Carriage Quarrels Risky

Mar 27, 2006  •  Post A Comment

Outdoor Channel CEO Andrew Dale knew he was taking a risk when he launched a public relations blitz last week to drum up consumer opposition to Time Warner Cable’s plan in several markets to move the cable network to a more expensive subscription package or drop it altogether.

As he saw it, he had no choice.

Independently owned Outdoor Channel has just over 26 million subscribers, and Mr. Dale, 51, is anxious to see that number rise. He can’t afford to lose any more distribution as cable and satellite operators begin rethinking their carriage of the channel, which focuses on outdoor activities such as hunting, fishing and stock-car racing. So Mr. Dale scrambled to spread the word to viewers, spending $200,000 to buy full-page ads in local newspapers and setting up a Web site with tips on how subscribers can contact Time Warner Cable and voice their opposition to losing Outdoor.

Outdoor Channel’s decision to publicly disclose its dispute with Time Warner Cable, which has nearly 11 million subscribers, marks the third time this year that a network has turned to the public for help with keeping a channel on a cable or satellite operator’s lineup.

Once rare, industry players say the tactic is being used more often lately and could become a more regular occurrence in the future as cable operators try to migrate analog video customers to digital by moving or dropping bandwidth-heavy analog channels to accommodate high-definition networks.

So far, the tactics have proven successful for some cable networks, which experts say could lead others to follow suit should channel carriage talks with a cable or satellite operator break down.

Earlier this month Mr. Dale and his colleagues successfully fended off a plan by Time Warner Cable to drop Outdoor Channel in Waco, Texas, after they coordinated with local hunting clubs to urge the operator to keep the channel.

But some experts warn public campaigns won’t always be successful.

“This is something you have to review very, very carefully,” said Jimmy Schaeffler, chairman and CEO of Carmel Group, a cable and satellite consulting firm. “You have to be very confident about your odds, because there is an awful lot to be lost, such as ill will against the channel.”

Mr. Dale knows that such tactics could add tension to an already tense relationship between the two companies. So he’s careful to ensure the campaign says nothing negative about Time Warner Cable and is more about informing viewers of the channel that it may soon vanish, he said.

“We want to make sure viewers of our channel knew that this change was coming,” said Mr. Dale, who added that the channel has a valid contract “with a number of years left on it” and that it is seeking more carriage from Time Warner Cable.

A Time Warner Cable spokesman said the company and Outdoor Channel are continuing to talk. He added that the cable operator routinely listens to customers about its channel lineups. Time Warner executives base their decisions about dropping channels on three factors-cost to carry the channel, the channel’s investment in new programming and ratings-and “not based on expensive, weeklong campaigns,” he said.

Still, GSN’s reliance on public outcry earlier this month apparently helped prevent the channel from being dropped from a Time Warner Cable system in Binghamton, N.Y. (it was moved to a digital package), and the strategy is likely to play a role in the coming weeks as the channel nears a May 1 deadline for being dropped from Time Warner Cable’s New York system.

Perhaps the most high-profile example this year was the tussle between EchoStar Communications and Lifetime Entertainment Services. The channel was removed from the satellite operator’s lineup for a month in January, and Lifetime sponsored full-page newspaper ads accusing EchoStar Chairman and CEO Charles Ergen of not having women’s best interests at heart.

Cable Under Pressure

To be sure, the idea of a cable network spurring public outcry against a channel being dropped or moved is nothing new.

With programming costs continuing to rise and cable subscribers howling loudly about cable bills that grow faster than the inflation rate, cable operators are under pressure to cut costs where they can. That leads to fairly acrimonious discussions between programmers and operators when contracts are up for renewal.

But while most negotiations between networks and distributors are held in private, there are times when talks reach an impasse and one side will turn to the public to apply pressure to the opposition.

Cable networks will often drum up public support by reaching out to special interest groups that can in turn lobby an operator. More recently, networks have gone directly to viewers, contacting people who have registered with channel Web sites or scrolling messages across the bottom of television screen urging viewers to contact an operator that is considering dropping a channel.

Rich Cronin, CEO of GSN, said that in the Binghamton case the network “made sure fans knew the situation and expressed themselves to Time Warner. Once they get the phone calls, e-mails and letters, they see we really are a popular channel.”

Singled Out for Removal

During its feud with EchoStar, Lifetime asked a number of organizations that promote women’s rights to write letters urging the satellite company to bring back the channel.

Lifetime presented a strong case to supporters, said Jessica Neuwirth, president of Equality Now, one of the groups that wrote an open letter in January to Mr. Ergen on behalf of Lifetime. “We do not get involved in commercial disputes, but Lifetime is an unusual resource for us, and it was not in our interest for Lifetime to be off the air.”

A Lifetime spokesman refused to comment on the matter, as did an EchoStar spokeswoman.

“The history of the operator-programmer relationship for a long time has been replete with examples of operators threatening to dislocate service and on the other side programmers engaging in pretty aggressive public relations campaigns to forestall that,” said Rob Stengler, a former Continental Cablevision executive who is now an independent cable industry consultant. “That is part and parcel to contract negotiations.”

However, as large media companies that own multiple channels use their might to secure carriage of smaller channels, some industry players say cable operators are left to single out smaller, independent channels for removal.

“The cable guys are scratching for every penny they can get, and because they can’t get more money out of the big players anymore-those guys have too much leverage-they turn to the small independents, who don’t have the bulk or the scale,” said the top affiliate sales executive of a fully distributed cable channel.

That leaves smaller channels with little choice but to turn to their viewers for help.

“Five to seven years ago [smaller channels] had to be a bit more careful about fighting the operators publicly. Today, it’s kind of like they don’t have much to lose,” Mr. Stengler said.

For his part, Mr. Dale said he doesn’t like having to go down the road of sharing his channel’s dispute with his viewers, but he feels he has little option.

“[The campaign] is not out to harm Time Warner Cable, it’s out to help them,” he said. “We feel this is not going to be good for them. It’s crazy to do this in a competitive market to a channel that is one the cheapest cable networks and has invested in upgrading its programming.”