
The chief executive of Altice USA says the pay TV provider is prepared to do battle with programmers like MSG Networks over what it considers to be exorbitant fees charged for the privilege of carrying broadcast and cable channels.
In an interview with Connecticut-based regional news channel News12 Westchester last week, Altice USA Chairman and CEO Dennis Mathew said the industry needed to “evolve the business model and the pricing” that does away with the practice of charging customers for channels they don’t want.
Like other pay TV providers, Altice USA is required to pay broadcasters and cable network programmers for the privilege of distributing their channels to pay TV subscribers. Altice USA operates Optimum, a service that offers cable TV in nearly two dozen states and the New York City metropolitan area.
There, Optimum has been engaged in a dispute with MSG Networks over the carriage of its regional sports programming after Altice USA’s contract to carry those channels expired on January 1.
As is typical in most programming-related disputes, Altice USA is objecting to a demand by MSG Networks that the cable TV operator pay more money for the rights to its channels. Those fee demands are not unusual, and are often cited as the principle driver behind higher cable and satellite bills over the past decade.
Altice USA says the fee demand is unjustified because not all of its subscribers watch MSG Network, which carries locally-televised games from the New York Knicks, New York Rangers, New Jersey Devils and other sports franchises.
For its part, MSG Networks says it is seeking a reasonable and fair rate for its programming, and has accused Altice USA of continuing to charge subscribers the same monthly fees despite the loss of MSG Networks programming.
Both sides have engaged in a particularly unusual public relations war over the past three weeks, with MSG Networks demanding Altice USA issue $10 bill credits to customers after the channels were dropped earlier this month. Altice USA later demanded MSG Networks shell out $125 million in refunds to existing Optimum TV subscribers, based on that $10 per month price that Altice USA says MSG Networks placed on the value of its programming.
MSG Networks programming continues to be available to Optimum TV customers if they purchase the streaming service MSG Plus through the Gotham Sports App, where a monthly pass to live sports programming. The cost of MSG Plus is $30 per month, or around three times higher than what Altice USA says MSG Networks charged its subscribers.
Cable operators like Altice USA have become more vocal about the broken distribution model of pay TV, where broadcasters and cable network programmers have most of the leverage. Typically, distribution contracts require cable operators to place certain channels in base programming tiers, and charge customers for access to networks like ESPN and CNN, even if they don’t watch or otherwise want those channels.
“It’s very confusing, and it’s a legacy model. The reality is, it’s not 1994, it’s not 2004 — the way people consume video has dramatically changed, dramatically evolved, and now it’s not just linear cable video the way people have consumed it in the past,” Mathew told News12 Westchester, which is owned and operated by Altice USA. “You have streaming products, you have user-generated content. You have the Big Tech companies coming into the fray that we would have never imagined — companies like Amazon and Apple and Google — and, yet, the business model has not changed. It continues to force us as distributors to force customers to pay for content that they don’t watch. And we want to take a stand. We want to provide our customers with value and choice.”
Those comments indicate that Altice USA is ready for a prolonged battle with MSG Networks over the issue, and both sides appear unwilling to cede any ground.
For its part, MSG Networks has offered Altice USA the unusual approach of resolving the issue by having it presented before a third party arbitrator, whose decision would be binding on both parties. Altice USA has not accepted that offer as of Wednesday.
Altice USA acquired Cablevision, the main provider of cable TV programming in the New York City area, from the family of Charles Dolan in 2015. Prior to the acquisition, Cablevision and MSG Networks shared common ownership.