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Cable Wars Get Litigious


Will the Tennis Channel lawsuit add a wrinkle to the Comcast-NBC deal?

Cablevision (CVC) continues to feud with Scripps (SSP) over the rates it pays to broadcast HGTV and the Food Network

Time Warner (TWC) just ended its own bitter war with News Corp. (NWS) over the rates it pays to broadcast Fox channels.

And now Comcast has waded into its own mess by allegedly screwing the Tennis Channel out of about 22 million sets of eyeballs, by giving preferential treatment to its own programming over that created by others.

Earlier this week, the Tennis Channel, which is owned by Teddy Forstmann's IMG and was started with nearly $100 million in VC funding from Bain Capital Ventures, Battery Ventures, Columbia Capital, JPMorgan Partners (JPM) and WaterView Advisors, filed a complaint against Comcast with the FCC over the issue.

Has Comcast been unfair?

Here's the situation:

Comcast owns the Golf Channel and Versus, which are both carried on the company's basic cable package and reach 22 million homes.

Comcast doesn't own the Tennis Channel, which is included only in the premium Sports Entertainment Package, which costs an extra $5 to $8 a month and reaches about 2.6 million homes.

However, when the US Open, the French Open, the Australian Open, and Wimbledon are played, Comcast lets all of its subscribers watch the events on the Tennis Channel, courtesy of a "free preview." After the matches, the channel goes back to the premium tier.

The Tennis Channel has now seen the light and realizes how much advertising and re-transmission revenue they're missing out on, due to getting the "red-headed stepchild" treatment from Comcast.

Sour grapes?

In the complaint, Comcast's president Stephen Burke, says that Comcast views its own networks as "siblings" but other networks as "strangers," according to the New York Times.

But Comcast says the Tennis Channel's claim is "baseless."

Is it? Last year, the Tennis Channel filed a similar complaint when Cablevision didn't make the network available during the US Open. Cablevision won that battle and now carries the Tennis Channel on a premium tier.

On the other hand, the National Football League had the same gripe with Comcast as the Tennis Channel currently does, before settling last spring. In that case, Comcast agreed to move the NFL Network from its premium sports tier to one that would reach more homes.

Will this affect Comcast's planned $30 billion deal that would give the outfit majority ownership of NBC, Universal Studios, and a raft of cable channels (including CNBC, MSNBC, Bravo, USA, SyFy, and Oxygen) with General Electric (GE) retaining 49%?

Yes. Typically, when mergers are announced, the FTC studies and investigates potential antitrust issues, with an assist by the Department of Justice. This time, the DOJ is heading up the investigation and looking extremely closely at what the deal would mean to consumers, as it would deepen Comcast's role as both a creator and distributor of television programming. The FCC will have to weigh in, as well.

The merger isn't expected to be scotched, although significant rules and restrictions are likely to be put in place to maintain a level playing field for other cable companies and channels and prevent them from getting iced out by a bigger, more powerful Comcast -- which is already the country's largest cable provider, with 23.8 million customers.

In the end, all this may be rendered moot, anyway.

The cable TV landscape will likely look significantly different 20 -- maybe even 10 -- years from now. In the last decade, TiVo (TIVO) and other DVRs gave viewers a more seamless way to watch their favorite shows and programming that the equipment recommended to them. The '10s will see viewers make a greater shift to both sponsored, Hulu-like sites and non-sanctioned peer-to-peer BitTorrent trackers.

If cable companies had a shred of foresight, they'd realize they need to prepare for that inevitability, team up with an ad-supported video site, and provide customers with greater control over what they can watch.

When that happens, it won't matter what service tier Comcast, Cablevision, Time Warner, et al decide to carry channels on, because there will only be one tier left.

And it'll only be available on your computer.
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