Skip to main content

GAC Picks Up More from CMT

Cable operators are continuing to re-examine their
relationships with programmers, as tensions heightened on two fronts last week: Country
Music Television lost more homes to its rival, and Turner Network Television began
shopping its new, pricier rate card.

CMT's loss is once again Great American Country's
gain, this time in Cincinnati, where GAC will pick up more than 200,000 subscribers.

Time Warner Cable in Cincinnati, effective July 1, will
switch out CBS Cable's CMT for Jones International Inc.'s GAC on its
expanded-basic service, which reaches 225,000 subscribers. In that same market,
Tele-Communications Inc. on June 1 swapped out CMT, which was offered a la carte, for GAC.

"We're thrilled," GAC president Jeff Wayne
said. "This is a huge system for us, and it's the first Time Warner market to
launch us."

The Cincinnati swaps marked a second hit in Ohio for CMT,
and the latest in a string of switch-outs of the network that has stepped up during the
past few months. On March 31, Coaxial Communications replaced CMT with GAC at its
Columbus, Ohio, system, which has 125,000 subscribers. TCI in Overland Park, Kan., dropped
CMT for GAC effective March 2, representing a loss of 80,000 subscribers. TCA Cable TV
Inc. replaced CMT with GAC across its systems, totaling some 700,000 subscribers, April
28. And Rifkin & Associates Inc. switched out CMT for GAC earlier in the year.

Some operators said they are picking up GAC because its
license fees are less expensive than CMT's for what they argued is essentially the
same programming: country-music videos. GAC is also paying modest upfront launch fees and
offering several years of free carriage.

With rising programming costs looming as a hot button for
cable operators, TNT has started to shop around its new, pricier rate card with operators.
TNT is seeking a 7 percent annualized increase on its approximate 55- to 60-cent monthly
per-subscriber license fee over the term of a new four- or five-year contract, depending
on the deal. The old contract expires at the end of the year.

As an incentive to persuade cable operators to renew early
-- by Aug. 31 -- TNT is offering them what is in effect a 20- to 25-cent-per-subscriber
marketing credit, which can help to offset some of the rate increase, according to MSO
officials. Each coming month, from September to December, cable systems will get a
5-cent-per-subscriber credit from TNT, one operator said. TNT officials declined to

Some MSO officials had anticipated that TNT, rather than
raising its rates, might actually give them a rebate of the 12-cent surcharge that the
network was collecting to pay for National Football League games. TNT passed on the NFL
package earlier this year, but it signed an $890 million National Basketball Association
deal. The new NBA deal cost more than the old NBA and NFL pacts combined, and the
surcharge is staying.

One operator complained last week that TNT's current
rate has been artificially inflated by two contracts' worth of NFL surcharges.
Balking at the proposed average 7 percent TNT increase, that official said his MSO is
already paying for the NBA through its deals with regional-sports networks. That operator
may opt not to give Turner's other networks, such as CNNfn and CNN/SI, carriage, as
retaliation for the TNT increase.

Several other operators said that while they weren't
happy about TNT's new rate card, they felt that it wasn't anywhere near as
onerous as the 20 percent increase that ESPN is looking for. And the marketing support
that TNT is dangling does make its increase more palatable, some operators said. One MSO
official said he had to pick his battles with programmers, and TNT didn't seem like
the right one to pick.

As far as CMT, network officials were taking the latest
subscriber switch-outs in stride.

"We couldn't stop them," said Lloyd Werner,
executive vice president of sales and marketing for CBS Cable. "They did say that
something was afoot, but we haven't gotten official notice yet."

CMT, despite the switch-outs, still has 42 million
subscribers because of additional launches, Werner said. That's about where it stood
in April, according to figures from Cablevision magazine.

CMT has no plans repeat in Cincinnati the tactic that it
used in Columbus, according to Werner. CMT mounted a campaign against Coaxial in Columbus
during which it co-sponsored a sign-up effort with direct-broadcast satellite provider
PrimeStar Inc.

"We have more than 6 million subscribers with Time
Warner, and it is a good customer," Werner said.

Many operators have privately expressed annoyance at
CMT's tactics in Columbus.

GAC has more than 3 million subscribers. In addition to
Cincinnati, GAC gained other subscribers as of June 1, but Wayne declined to identify
where they were.

At Time Warner in Cincinnati, vice president of public
affairs Jennifer Mooney said, "Great American Country has a much better product for
several reasons. It has fewer commercials than CMT, and that nets out to 16 more hours per
week of programming for our customers."

Time Warner is also benefiting from the four minutes of
local avails that GAC offers, she said.

At TCI Cablevision in Cincinnati, general manager Craig
McCrystal said only 1,800 of his 70,000 subscribers had been ordering CMT a la carte for
85 cents per month. TCI opted to collapse several of its a la carte offerings to expanded
basic, switching out CMT for GAC in the process.

"Our feeling was that Great American Country really
played more videos than CMT," McCrystal said, "and our customers are just
interested in seeing the videos."

Wayne said GAC finalized a corporate-carriage deal with
Time Warner a little more than a month ago.