Advertisers Worry About Scripps/Cablevision Spat

Scripps explores alternative means of delivery for Food/HGTV

By Claire Atkinson -- Broadcasting & Cable, 1/4/2010 2:35:13 PM

Cablevision and Scripps Networks Interactive continued their contract war over the weekend, with neither side looking likely to back down from a row which has deprived three million Cablevision homes in the New York region from receiving Food Network and HGTV.

One group of viewers is watching the spat particularly closely: the advertisers. Scripps Networks said it had reached out to the ad community to inform them that the networks were being pulled on Dec. 31 since Cablevision had not come to terms with Scripps over a new carriage contract.

Ira Berger, director of national broadcast at the Richards Group, explained that while marketers' buys are protected to some extent because of ratings guarantees, that can be made up elsewhere, he added: "In the case of Scripps, New York and Long Island has such a concentration of media people. It is such an important market for a lot of products that it takes on an importance beyond the impressions you are losing."

Marketers are also watching carefully to see how long these disputes keep major services off air. "You wait and see if it's going to be long term like Versus and DirecTV, that's the real concern...and its looks like it will increase in frequency," said Berger. Advertisers had been watching the now resolved News Corp/Time Warner Cable face-off over new fees for Fox network, with bated breath.

Media buyer Jason Kanefsky, senior VP of MPG points out that at least the argument is playing out during the softest sales month for many companies - Home Depot and Lowes are two of Scripps biggest advertisers - but even he is keeping his fingers crossed this does not turn out to be the kind of long term stand-off. "It's never good when you lose coverage, but I don't expect it to be long." Kanefsky feels Scripps is warranted in asking more for their two flagship brands. "When they first came on they had to battle for space, and they gave it away. Ten years later they're cracking the top ten and they have viable brands...This warrants an increase in fee." Though Kanefsky also acknowledged the dilemma for Cablevision, "If they give in to Scripps then who's next?"

A spokeswoman for Scripps said that management had reached out to Cablevision Jan. 3, and still held out hope for a discussion Monday (Jan. 4).  As of 2.00 p.m. E.T. it had not heard back. "We are continuing negotiations in a very productive manner with Time Warner Cable," said the spokeswoman, adding that Scripps had tied up several other distributor agreements this year. Each negotiation involves not just the right to broadcast the two lifestyle channels but all kinds of elements such as participation in TV Everywhere initiatives that bring programming to individual online venues, video-on-demand and syndication rights and co-marketing agreements.

A Scripps spokeswoman added: "We're looking at ways to get programming out there for our viewers," but declined to say whether that meant bypassing the cable operator altogether and tying up with an online provider. "We aren't doing long form online; that undermines the value equation we have with all our distribution partners." She said having the channels back on cable was the best solution for viewers but that, "in the meantime we're looking at some alternatives."

According to a note from Morgan Stanley analyst Benjamin Swinburne Monday, Food Network ratings were up 21% in December among the 18-49 year old demographic, and up 13% at HGTV over the same period. Scripps newest service, Travel was also up 13%.

Despite Scripps popularity with viewers the networks receive tiny fees when compared to other channels. According to data from SNL Kagan, HGTV receives 13 cents per household per month, while Food Network receives 8 cents. In a release dated Jan. 1, Scripps says Cablevision pays the company less than 25 cents for its networks. Cablevision said in a statement Jan. 3, Scripps is looking for a 200% rate hike for those two services.

Cablevision said Scripps has declined their offer to make HGTV and Food Network available while the two work out their differences. "If Scripps really cared about their viewers Scripps could put their programming back while we negotiate a new agreement.  We believe it was irresponsible for Scripps to take the channels off, and it is irresponsible for them not to put the channels back on."

Cablevision's tactics are being described as hardball by many media commentators. The risk for Cablevision in not coming to terms with Scripps involved the possibility that customers shift to rival Verizon Fios in order to get the two channels. "HGTV and Food Network programming are viewed by two million primetime households daily. This would translate to approximately 61,000 subscribers representing $65 million of Cablevision's $3.2 billion estimated 2010 revenue if all viewers canceled their service," wrote Morris in a note today.