AMC Networks continue to negotiate to avoid a New Year’s blackout with small cable operators represented by the NCTC, but the head of the group expects some won’t reach an agreement.
Rich Fickle, CEO of the National Cable Television Cooperative, said that after the NCTC filed complaints with the FCC over some of AMC’s tactics, it had a productive day of discussions with the programmer in New York last week and continued conversations over the holiday weekend.
“Have we solved the Rubik’s Cube on this one? No we have not. We’re still trying to figure out how to make this work for our members,” Fickle said.
While he’s optimistic, he says that in speaking with his group members, “there’s a notable number, a large number, that believe that at the current set of terms, that either for economic or for balance reasons, they could not enter into an agreement with AMC. They just can't do it,” he said. That could mean a million or more subscribers losing access to the channels via cable.
An AMC spokesperson had no comment on the negotiations.
The heart of the problem is that since the last agreement was reached about five years ago, AMC has grown with original programming, most notably The Walking Dead, now the most popular program on TV outside of NFL football. AMC has also invested in the other networks it owns and wants the small operators to carry all of those channels and pay substantially higher rates to do so.
The higher rates will either cut into operator profit margins, or force them to raise rates. Raising rates is tough because cable bills are already seen by consumers as too high and are encouraging cord-cutting as the pay-TV business faces new competition from over-the-top and streaming competitors.
“It’s true. Things have changed dramatically for the AMCs of the world in the last five years,” Fickle said. “The gap of them trying to catch up all of a sudden is just hard”
Fickle called the situation one of the hardest challenges the group has had since he joined five years ago. In addition to a big increase, AMC is seeking broader carriage for its other networks, including SundanceTV, IFC and BBC America. It also wants operators to pay for those networks even if subscriber don’t have access to them because of capacity constraints or other reasons.
Those items are still on the table. “There may be situations where you’re willing to make some tradeoffs,” he said. We’re probably willing to entertain anything that makes sense in order to keep some of this content on with consumers and solve the issues in a creative way.”
But he added that for many small operators, “It’s not a matter of negotiation. Their back is against the wall with regards to what they can do in terms of adding new channels and the amount of rate increases they can either absorb or pass on to their consumers.”
Earlier this year, some NCTC members dropped Viacom’s networks even though NCTC was able to reach an agreement with the programmer.
Fickle notes that the operators that dropped Viacom channels haven’t regretted the decision.
“The problem is the small and mid-sized markets probably are the early warning system of when the market is starting to hit the limits,” he says. “I think we find ourselves in the position of having to make these choices that maybe later on larger MVPDs will also have to make.”
There will be other program agreements expiring in the coming months, but “none of them are as challenging as this one right now,” Fickle says.