A group of cable operators is suing Viacom's MTV Networks unit, alleging that MTV breached a contract by issuing an unauthorized license fee increase.
The National Cable Television Cooperative, comprised of around 40 small-to mid-size companies serving about 8.5 million subscribers around the country, said MTV Networks violated the terms of a contract that took effect last September.
According to Frank Hughes, senior vice president of programming for the NCTC, MTV Networks had promised it wouldn't raise the license fee it charged the co-op to air its programming unless it was going to raise fees for all cable operators.
But MTV wants to boost its fee by about $250,000 a month through June 2000, or about $7 million, over what the current contract calls for, said Hughes, and has offered no proof that it's asking bigger cable companies to make the same sacrifice.
Douglas Fuller, executive vice president of new business development for St. Petersburg, Florida-based St. Joseph Cablevision and a member of the NCTC board, agreed. "[The co-op said,] 'show us somehow that everybody got a rate increase, and we'll go away,' " Fuller said. "But they were never able to produce that."
Hughes said fixing a dollar amount in terms of damages would be difficult at this time. MTV Networks declined to comment.
MTV, Time Warner's TNT and Disney's ESPN have been particularly aggressive in their licensing tactics over the years based on their abilities to attract the 18-49 adult audience that advertisers find so desirable.
TNT and ESPN have huge sports contracts to pay for, which only serves to further justify any fee hikes they feel inclined to make. "Fee increases are something you just have to live with," Hughes said. "...It's tough. I don't know where this is headed."
Hughes and Fuller emphatically denied that the lawsuit is intended to stem the tide against rising license fees across the industry. They said this is simply a legal dispute between the co-op and MTV - nothing more, nothing less.
Another NCTC board member, Tyrone Garrett, president of Sikeston, Missouri-based Semo Communications, said the co-op was formed with the expressed purpose of helping smaller and mid-sized operators cope with rising programming fees.
"It seems like we don't have a lot of leverage," Garrett said, "and that's what the co-op helps bring to the table."
The NCTC buys the programming provided by various cable channels on a volume basis, and is therefore able to get rates that are discounted by as much as 60 percent, Hughes said.
"We've gotten most of the major [cable] programmers to the table," said Garrett. "There's still a few holdouts." Currently, Garrett said, the NCTC is in negotiations with ESPN on a rights package.
By David B. Wilkerson, CBS MarketWatch