SkyFILES: The Aftermath of DISH/Viacom

[Gregg Lengling]

Viacom and EchoStar have ended their skirmish. But was the dispute just the beginning of more challenges to come for the cable and satellite TV industry?

The spat between the companies, concerning DISH Network's carriage of Viacom channels and CBS owned-and-operated nets, not only put the spotlight on the two entities. It opened up a Pandora's Box of issues for the entire pay-TV business.

This week, consumers got a peek behind the curtain that divides them from the wizardry of multichannel programming. They've learned a lot about how "their" channels get chosen - and they may begin to push for the chance to pick and choose only the channels they want instead of paying for dozens of channels they don't really care to watch.

That could be troublesome for pay-TV services and programmers.

In a letter EchoStar CEO Charles Ergen sent to Viacom's Mel Karmazin early this week, he said his company does not want "increased rates to its customer base so that you can force us to carry unwanted cable channels, like Noggin and the Games and Sports (GAS) channel." Ergen made the point that viewers may not want extra Viacom channels, much less watch them. The argument could be made that there are enough channels for kids, so why would they need - or even watch - Nickelodeon's GAS?

The skirmish also brings up a la carte, or the ability for consumers to buy only the channels they watch. If you don't want your MTV, then maybe you're better off with DISH Network.

Indeed, customers calling Ergen during this week's series of "Charlie Chat" brought up the idea of paying only for the programming they want. And Ergen made the point that the typical viewer is dedicated to about 15 channels and not much else.

Demands for carriage of extra networks have always been a thorny issue for programmers. And programmers do not like the idea of a la carte, in which they would have to face the possibility their content isn't a favorite among large groups of consumers.

While this week's battle may not shape up well for programmers, it's also not going to get any easier for distributors, especially DISH Network, the largest distributor with no ties to programming or content.

EchoStar promised a $1 monthly refund for certain packages with the Viacom channels that went dark. During this week's "chats," consumers asked whether they would get any break in their bill if they subscribed to an annual subscription.

The Viacom/EchoStar spat also put the spotlight on competition. Can't get VH1 or BET on DISH Network? You can always get it on cable or DirecTV. Not only did Viacom promote the alternatives, EchoStar pointed out the competition and their selection of Viacom channels.

Both sides think they had the upper hand - or the better argument - concerning the battle. Yet at the end of the day, Viacom and EchoStar will create more challenges for themselves - and more questions for viewers.

And you think the rest of the business will escape unscathed? Think again. With ideas floating around consumers' heads like a la carte - or making the easy switch to another competitive pay-TV platform - programmers, cable operators and satellite TV services must realize they are not immune to the same troubles that are plaguing this week's two warring sides.

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