Is Cable Flirting With Danger?

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A troublesome trend has emerged over the past year in the cable industry. Public disputes over retransmission fees, or "retrains," have been all the rage, with customers caught squarely in the middle.

Since Saturday morning, 3 million Cablevision (NYSE: CVC  ) customers in the New York market have gone without Fox networks, after the cable giant and Fox's parent, News Corp. (NYSE: NWS  ) , could not come to terms on a new carriage agreement. This began on a weekend that featured the MLB playoffs and NFL football. And if you don't think this is a big deal, you clearly don't live in New York.

But what are the repercussions for Cablevision? Take its first quarter of 2010, when the company engaged in high profile retrans battles with ABC parent Disney (NYSE: DIS  ) and Scripps (NYSE: SNI  ) , parent of the Food Network and HGTV. While the Disney negotiation received a ton of press because of the upcoming Academy Awards, the actual blackout only lasted 21 hours, and affected the Oscars for a mere 13 minutes. The standoff with Scripps lasted longer -- some three weeks -- but didn't attract nearly the attention.

How'd this impact Cablevision? The company actually gained customers in the quarter!

What about Time Warner's (NYSE: TWC  ) dispute with News Corp last December? Well, despite the fanfare that followed the expiration of the Dec. 31 deadline, no service interruption actually occurred, and thus customers felt no impact.

Despite the examples above, this trend has to be bad news for the cable companies over the long term. Consider their alternatives:

  • Hold your ground with the broadcast behemoths, and risk losing their signal. If these blackouts become more protracted or occur during a major broadcast event, they risk alienating customers.
  • Pay exorbitant fees, and inevitably pass that expense on to the customer, who is already paying more than they'd like.

You'd think that customers would support providers holding their ground to keep prices low, but I'm not convinced they are. The emotion that comes with missing a big game or your favorite show is powerful stuff. And when other people with different TV providers in your area have Fox, customers will inevitably blame their cash-flush cable provider.

At some point, these factors have to be reflected in the subscriber numbers. I have no loyalty to my cable provider. And I don't think I'm the only one.

Fool contributor Stephen Marini doesn't own shares in any of the companies mentioned above. Walt Disney is a Motley Fool Inside Value selection. Walt Disney and Scripps Networks Interactive are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletter services free for 30 days. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Motley Fool has a disclosure policy

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  • Report this Comment On October 21, 2010, at 8:16 PM, penchy1 wrote:

    What choice do I have? There is no competition allowed in my town and I have too many trees.

    I am screwed by my municipality enforced cable monopoly. This actually may be an opportune time to convince the council to allow competition.

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