Monday, May 05, 2003

Cable TV: The fight for shelf position It's not enough to gain shelf space; you also want to gain desirable shelf space. In a supermarket, that means having your product at eye level for most adults as they pass down the aisles; unless you are selling to children (sugary breakfast cereal or candy). On a cable TV system, that means getting channel numbers in the low range. Chances are, if you are channel 56 or 64, no one will find you. If fact, CBS did a study which showed that a channel is less likely by 40% to be watched on a cable system if its number is higher than 15. As a result, there is strong contention over the lower channels. That contention means money and power for the cable service providers like Comcast, Time-Warner, Delphi, or Cox Communications. The companies that own cable channels are willing to pay for better channel position, often in the form of special ad deals. Some networks lower the fees for carrying desirable channels if they are placed under a certain number. But channel position is a zero-sum game. If I improve my position, someone else worsens theirs. All this was highlighted by a 2001 incident described in the Wall Street Journal in an article termed "USA Networks Complains of Bias in Time Warner's Channel Assignment." (August 6, 2001). What happen is this: In the New York area, Bravo (Rainbow Media/Cablevision), TNN (Viacom) and Court TV (Viacom/AOL Time Warner) paid Time-Warner cable to move them from high numbers to lower numbers. Considerations were said to be over a million dollars apiece. However, when Court TV took over Channel 23, USA Networks got knocked from there to 40. And when Bravo got 15, CNBC has exiled to Siberia, namely channel 64.  (Interesting to note that NBC has since bought Bravo.) When both NBC and USA Networks raised a stink about this, Time Warner cable was shamed (perhaps under threat of litigation) into reversing itself. Still the jockeying goes on. And in the few channel types where there is real competition (news, business news, sports), the competition is all the more furious. But here’s the kicker: vertical integration. AOL Time Warner, aside from owning one of the bigger cable systems, also owns networks like CNN and TNT, and has a part interest in others. Comcast, the largest cable system, also has its own local news and sports channels. It's hard to imagine that their own products won't get the best shelf position possible. The only alternative is to be a big enough cable network supplier (NBC, Fox, Disney, Viacom) to have the power to have some real say in where your channels play. 11:39:21 AM

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