New York -- CBS Cable's Country Music Television has
taken off the gloves in its distribution battle with Great American Country, slashing
monthly license fees for midsized MSOs and signing long-term deals with most of its
affiliates.
CMT has lost 5 million subscribers since GAC, owned by
Jones International Networks, began offering MSOs cash in exchange for carriage in 1997.
Much of GAC's growth has come at CMT's expense,
but CMT's new deals ensure that future carriage battles with GAC will only occur in
markets where neither channel is carried, CBS Cable executive vice president of sales and
marketing Lloyd Werner said.
"We recognize that over the past couple of years,
we've lost some carriage. That erosion is now over," Werner said. "Any
growth that GAC has after this has to come from new systems. It's not coming from
us."
CMT counts 38.5 million subscribers, according to Nielsen
Media Research cable-universe estimates for February, while GAC has 13.3 million.
CBS closed 15-year carriage deals during the fourth quarter
with AT&T Broadband & Internet Services, Time Warner Cable, Charter Communications
Inc., Cablevision Systems Corp., Adelphia Communications Corp., DirecTV Inc. and EchoStar
Communications Corp., Werner said.
CBS also cut its rate for midsized MSOs below the prior 5
to 6 cents per subscriber, per month, Werner said.
"We had to make concessions to them, because
that's where we were most vulnerable," he added, noting that some MSOs were
taking GAC's offer of launch fees ranging from $1 to $3 per subscriber, plus free
carriage for 10 years. Werner would not spell out the discount, but he said it was
"deep."
The deals with midsized MSOs -- including Cable One Inc.,
Service Electric Cable TV Inc., Mediacom LLC, RCN Corp., Helicon Cable Communications and
Armstrong Cable Services -- range from five to 15 years.
"[CBS was] very, very competitive," Cable One
vice president of strategic marketing Jerry McKenna said, declining to discuss the rate he
was offered. "We felt very good about the agreement they proposed to us."
CMT also gained new carriage commitments during the recent
negotiations that will add 5 million to 7 million subscribers during the next 18 to 24
months. "By 2001, CMT will be in no less than 43 million homes, maybe as many as 45
million to 46 million homes," Werner said.
The discounted rate for midsized MSOs will cause a drop in
CBS Cable subscription revenue during 2000, Werner said. But the company expects ad
revenue to increase significantly from the distribution gains, resulting in a 20 percent
jump in total revenue for the year, he added.
Industry consolidation makes it difficult to calculate the
exact number of subscribers CMT will gain, Werner said.
For example, AT&T Broadband agreed to carry CMT on
MediaOne Group Inc. systems after the merger of those two MSOs closes. But if AT&T
Broadband swaps a MediaOne system with Comcast Corp., Comcast could drop CMT and replace
it with GAC.
Comcast has switched out CMT for GAC in nearly all of its
systems since it acquired GAC parent Jones Intercable Inc. CMT has lost 2.7 million
subscribers through Comcast drops.
Industry consolidation hurt CMT in some markets. CMT
affiliate Classic Cable Inc. merged with GAC affiliate Buford Television Inc., and CBS
expects Classic to dump CMT and replace it with GAC, CBS Cable senior vice president of
affiliate relations Steve Soule said.
"We have not had any favorable deal brought to us by
CMT," Classic CEO J. Merritt Belisle said.
Last month, Comcast bought 1.25 million-subscriber MSO
Lenfest Communications Inc., which carries CMT. CBS said Comcast may replace CMT for GAC
on Lenfest systems, as it has in other markets. "Anything that Comcast buys, our
assumption is that they'll drop CMT and put GAC in," Soule said.
A Comcast spokeswoman confirmed that the MSO dropped CMT to
carry GAC in most systems, but she said the company hasn't decided yet about
programming changes for the newly acquired Lenfest systems.
AT&T Broadband, Cox Communications Inc. and Time Warner
representatives confirmed that they struck new carriage deals with CMT.
Most of Cox's GAC subscribers are in systems it
acquired from TCA Cable TV Inc., a spokeswoman said, adding, "We don't have any
plans to make changes with regard to dropping one service to carry another."
Jones International vice president of marketing Scott
Durand said the company could not comment on the GAC-CMT battle, citing a quiet period
related to the company's upcoming initial public offering.
CBS decided not to renegotiate new deals for sister channel
The Nashville Network along with CMT because the company already has long-term carriage
deals in place for TNN, Werner said.
That stance put CBS at odds with the National Cable
Television Cooperative, the small-MSO buying group. Last February, NCTC vice president of
programming Frank Hughes said he told CBS that the NCTC would renegotiate an affiliation
deal for CMT only if CBS opened up the TNN contracts at the same time.
"It's either both or nothing," Hughes said
he told CBS. "They declined."
