The Other Gatekeeper: AT & Ts Matt Bond

Fred Dressler's counterpart at AT & T Broadband is Madison "Matt" Bond, executive vice president of programming for the MSO.

Time Warner Cable senior vice president of programming Dressler and Bond are the most powerful programming gatekeepers in the cable industry. They help to determine which networks will get access to their soon-to-be-29.3 million subscribers: 12.7 million for Time Warner and 16.6 million for AT & T Broadband once it completes its acquisitions, such as that of MediaOne Group Inc.

The two men are a contrast in terms of not only their personal backgrounds, but also because they have taken different paths regarding several key programming decisions during the past year or so.

In terms of their resumes, Dressler has a background in reporting and editing, both print and television news. He came to cable in 1976 as assistant general manager of American Television & Communication Corp.'s system in Shreveport, La.

Bond is a lawyer by trade. A graduate of the University of Denver and the University of Colorado Law School, he joined then-Tele-Communications Inc. in 1992 as assistant director of programming, rising to his current post after a series of promotions.

Dressler's and Bond's differences in past experience show up in their different approaches to negotiating.

Said one cable-network president, "When I deal with Fred, I feel like I'm dealing with a businessman. When I deal with Matt, I feel like I'm dealing with a lawyer. Matt is coming from a little bit of a different place than Fred."

But perhaps more important, AT & T Broadband and Time Warner have diverged and made very different decisions on programming in recent months.

For example, in June 1999, AT & T Broadband was the first major MSO to sign up for NBC's Olympic Games deal. It is a complex 8-year package that also includes retransmission consent for NBC-owned TV stations, hefty license-fee increases for CNBC and MSNBC and a $1-per-year, per-subscriber surcharge for the Games.

In contrast, Time Warner has passed on the Olympics package, saying that the deal is too pricey.

AT & T Broadband was also the first major MSO to do a carriage deal with Geraldine Laybourne's women's network, Oxygen. But Time Warner hasn't reached an affiliation deal with Oxygen yet, meaning that the fledgling network doesn't have wide carriage yet in the media capital of the world, New York City.

Finally-with the exception of one minor dispute with a TV station in Corpus Christi, Texas-AT & T Broadband hasn't had any major battles on retransmission consent this year. That, once again, hasn't been the case with Time Warner. It has been embroiled in a bitter, public brouhaha with The Walt Disney Co. over retransmission consent for ABC Inc.-owned TV stations.

Some MSO programming executives-Dressler, as well as others-have complained that AT & T Broadband, in its former incarnation as TCI, granted substantial license-fee increases during the past few years.

Critics claimed that as a result, a high standard or benchmark for rate-card hikes was set for the entire industry, with programmers expecting similar big increases from other MSOs. AT & T Broadband officials disputed that claim.

Three years ago, then-TCI president Leo J. Hindery Jr. helped to engineer a 10-year contract with Disney that covered ESPN and Disney Channel, moving the premium channel to basic, as well as granting the MSO retransmission consent for ABC-owned and Hearst-Argyle Television Inc.-owned TV stations.

Back then, cable operators complained about the rate increases TCI granted ESPN as part of that deal, charging that TCI had in effect negotiated the rate for the entire industry.

The speculation then was that Hindery, now CEO of GlobalCenter Inc., was sending a "peace-in-the-valley" signal to programmers after a difficult period of friction before he joined TCI. During that period, the operator dropped networks from local lineups in much-publicized disputes.

Hindery was also instrumental in AT & T Broadband's agreement with NBC for the Olympics, according to sources. One reason why Hindery was eager to do that deal was to show Washington that the cable and broadcast industries could hash out their own problems without government intervention on issues such as digital must-carry.

AT & T Broadband critics claimed that the MSO is now feeling the impact of the programming-cost increases it allowed networks to extract. AT & T Broadband recently announced rate increases that would average 6 percent to 7 percent, but that would spike in some areas to 21 percent, partially blaming programming costs for the increase.

Bond rejected any notion that AT & T Broadband would give big license-fee increases to programmers only to pass the extra costs on to subscribers.

"That was certainly never the approach at TCI or AT & T," he said. "We've never been of the mind-set that we were willing to grant rate increases simply because we thought we could pass them through. That's never been us."

Hindery, in particular, took umbrage about negative remarks about the license-fee increases TCI-AT & T Broadband paid out to cable networks over the past few years, saying that money helped to nurture the development of quality programming services.

"I will take no criticism for what we did," Hindery said. "We helped to incubate new services. We supported A & E Network, The History Channel and Lifetime [Television]. We took a strong stand on Oxygen. I would do it all over again. I was very outspoken on programming-cost increases when I thought they were unfounded.But if there is no good programming on cable, there is no cable industry."

A lot of factors have to be weighed in the equation on rising programming costs, according to Hindery.

"We tried to balance our responsibilities to our customers, our shareholders and our industry," he said. "That's a difficult balance.But if our industry doesn't have quality programming, it's just an undifferentiated distribution business."

For example, Bond defended AT & T Broadband's decision to jump on board for the Olympics. Other major MSOs-such as Time Warner and Comcast Corp.-have not done so.

"Whether the Olympics package is in fact pricey remains to be seen," Bond said. "Time will tell whether it's a good value or a steal, or overpriced. Obviously, the Olympics are very high-value programming, very high-visibility programming. We'll be glad to have it on our cable systems, and we're very excited about what NBC will do with it."

Added Bond: "Quite simply, we were engaged in a negotiation of a very far-reaching deal, an extensive deal with NBC of which the Olympics package was part. So that really dictated the timing of the Olympics deal that we did."

As for AT & T Broadband's affiliation deal with Oxygen, Hindery is a longtime fan of Laybourne, and he has been one of Oxygen's biggest, most public boosters from the get-go, as he himself said.

Hindery sees women as an underserved audience. According to sources, AT & T Broadband committed 7 million subscribers to the women's network by 2002, provided that the start-up network also lined up carriage for 8 million additional subscribers from other MSOs within a certain time frame, reportedly by its launch.

Oxygen officials have said they met that benchmark. Industry skeptics have questioned whether Oxygen really has. Bond won't comment. "I can't really talk about any of my discussions with Oxygen," he said.

As for AT & T Broadband's lack of retransmission-consent wars this year, Bond doesn't think his MSO had any special answers or magic bullet. "It has more to do with expiration dates on particular contracts that we have, really," he said. "A lot of it is timing."

In the broad picture, in terms of addressing rising programming costs, Bond thinks MSOs and programmers should use interactive technology to create a new financial model, generating new revenue streams that both parties can use to offset costs.

Taking advantage of electronic commerce, for example, and other interactive functions, MSOs and programmers can "supplant license fees," according to Bond.

He added, "There's a limit to how many fee-based services can be contained within a 30- or 40-channel cable package."