Video services

Cablevision, Verizon Team on Content

Here's a strange one: Even though they're going head-to-head for video, broadband, and phone subscribers in the New York metro area, Cablevision Systems Corp. (NYSE: CVC) and Verizon Communications Inc. (NYSE: VZ) have managed to strike a key TV programming deal.

Verizon announced a multi-year pact earlier today with Cablevision's Rainbow Media Holdings unit for the rights to distribute Rainbow's movie, sports, music, and video-on-demand (VOD) programming networks. The telco plans to carry all of the newfound cable programming on its growing video service, FiOS TV, which competes directly with Cablevision's own video offerings in the Bronx, Brooklyn, Long Island, Westchester County NY, southwestern Connecticut, and northern New Jersey.

Specifically, the Verizon-Rainbow deal covers such national cable networks as AMC, WE tv, IFC, and fuse, as well as regional sports channels MSG Network, FSN New York, FSN New England, and FSN New England's high-definition fare. It also encompasses such on-demand channels as Mag Rack and sportskool but not regional news channel News 12.

Predictably, both Verizon and Rainbow officials praised the pact in the formal announcement today. But they didn't disclose any terms of the agreement, including the exact number of years involved.

Since launching a TV service in the New York suburbs earlier this year, Verizon has been gunning for Cablevision's video and broadband subscribers with its FTTP FiOS network, forcing the MSO to boost its data speeds to the fastest in the cable industry. At the same time, Cablevision has been wooing Verizon phone customers with steep discounts on the cable operator's Optimum Voice VOIP service.

Although Cablevision and Verizon are as close to mortal enemies as two companies in rival industries can be, they both needed to reach a programming distribution agreement in the end.

Verizon, always hungry for new TV programming, needed a deal because the Rainbow channels are particularly popular in the New York area. The phone company, which owns distribution rights to most other cable programming, has been trying for many months to crack the tough Cablevision façade and gain access to the Rainbow slate.

For its part, Cablevision needed a deal because Rainbow's financials have not been terribly impressive lately. In the third quarter ending Sept. 30, for example, the programming unit reported operating income of $15.2 million, down 23.1 percent from $19.8 million in the year-earlier period, despite a 3.1 percent rise in net revenues to $217.0 million.

Cablevision officials have also dropped hints about selling Rainbow or finding "strategic" partners to share the financial load of the programming unit in recent years. But, in their quarterly earnings call with analysts last week, they declined to shed any new light on their plans.

— Alan Breznick, Site Editor, Cable Digital News

optodoofus 12/5/2012 | 3:34:27 AM
re: Cablevision, Verizon Team on Content > No one under 50 cares anymore.

Au contraire. I am well under 50 and an avid Internet user, but have never downloaded or watched a video from YouTube. I have on occasion watched AMC and some of the other Rainbow channels.

materialgirl 12/5/2012 | 3:34:27 AM
re: Cablevision, Verizon Team on Content Declining results for Rainbow are a leading indicator of couch-potato entertainment. The end will come as earnings decline despite growing expenses. No one under 50 cares anymore. They are glued to GooTube.
Michael Harris 12/5/2012 | 3:34:20 AM
re: Cablevision, Verizon Team on Content Visionary? Not really. CVC is simply complying with federal law.

It shall be unlawful for a cable operator, a satellite cable programming vendor in which a cable operator has an attributable interest, or a satellite broadcast programming vendor to engage in unfair methods of competition or unfair or deceptive acts or practices, the purpose or effect of which is to hinder significantly or to prevent any multichannel video programming distributor from providing satellite cable programming or satellite broadcast programming to subscribers or consumers. -- From the U.S. code covering "Development of competition and diversity in video programming distribution."

Enough with this "beginning of the end" stuff. It's simply a market segmentation question. Some people like television, some people like Internet video. There will be room for both for quite some time.
ethertype 12/5/2012 | 3:34:20 AM
re: Cablevision, Verizon Team on Content This is the beginning of the end... but not the end of couch potato viewing habits, by any means. It's the beginning of the end of vertical integration of content aggregation and delivery.

Cablevision is being both opportunistic and visionary in making this deal. They are opportunistic because they know VZ is in a hurry to get to content parity with FiOS TV and will pay big right now. That's pretty attractive if you've got a property you want to unload, but the current shaky results are getting in the way of attracting buyers. More revenues = higher valuation + quicker sale.

They are visionary because they recognize that they vertical integration hurts content. Every content owner and aggregator these days is pushing to get into as many of the expanding distribution channels as possible, partly for fear of being left out as the new distrubition models shake out. If you own both content and a distribution channel, you end up competing with your customers. Even content that is strictly limited to New York metro audiences could be distributed through 6 different multichannel pay TV operators, never mind 100's of Internet distribution options.

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