There are three things that are certain to occur in life: death, taxes... and battles between content providers and cable/satellite platforms over the prices paid to carry essential channels.
Last month, EchoStar (Nasdaq: DISH) and Viacom (NYSE: VIA) became temporarily estranged over the latter's MTV Networks (as well as its major CBS broadcaster). In the past, EchoStar has had problems with Disney (NYSE: DIS) over ABC Family and ESPN Classic. The Mouse also had to contend with Cox (NYSE: COX) at another point in its cable career, once again over the ESPN brand.
This time it's the channels of Time Warner's (NYSE: TWX) Turner Broadcasting segment that are affected. EchoStar is making a valiant attempt to slow the rate of inflation in the costs associated with maintaining a quality portfolio of offerings.
The networks in play here comprise a collection of popular, can't-live-without items, such as CNN (I can't imagine existing without seeing Larry King's constant interruptions of his guests in mid-sentence on a nightly basis), the Cartoon Network (I'd die if I couldn't feel the Force of those ephemeral, over-before-you-know-it Clone Wars 'toons), and CNN Headline News (there's nothing better than sitting in front of the television and waiting for a piece that was first teased several hours before).
Of course, the parenthetical statements above are to be taken as facetious hyperbole -- the Turner channels genuinely offer a host of valuable entertainment choices and important news information. As such, it can be seen that Time Warner certainly has the advantage.
Recent history has shown that the public doesn't take kindly to having the flow of content it has become accustomed to suddenly disrupted. Although customers have the choice to switch to a competing platform, they probably won't in any significant number because it's a cumbersome process. Therefore, customer pressure will probably ultimately reign, as it usually does, in the Turner/EchoStar tussle, and the satellite entity would conceivably be forced to compromise to Time Warner's benefit in very short order.
The ultimate effect down the line of these skirmishes over fee increases could be something like the separate pricing scheme described in an earlier article. The bottom line is that the overused phrase "content is king" isn't overused for nothing: It is more desirable to invest in the suppliers of content rather than the platform distributors, since the suppliers arguably have better pricing power and a more nimble economic model. (Think of all the expensive upgrades and servicing a cable/satellite company must contend with at any given time).
David Gardner recommended Time Warner for
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Fool contributor Steven Mallas owns shares of Disney.
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