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Advertisers Worry About Scripps/Cablevision Spat

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

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

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.