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Cable One's fight with Turner Broadcasting: Inside program packaging

A dispute between Time Warner's Turner Broadcasting unit and a small cable operator has turned particularly nasty and is shining a brighter light on how programmers package their channels for sale to distributors.

Cable One, which has 730,000 subscribers in 19 states, recently dropped several Turner-owned cable networks, including CNN, TruTV and HLN, rather than agree to pay more money to carry them under a new deal.

However, Cable One wanted to continue carrying TBS, TNT and Cartoon Network and was willing to pay the higher fees Turner was seeking for those channels.

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Rather than reach an agreement directly with Turner for TBS, TNT and Cartoon Network, Cable One  signed a deal to carry the networks through the National Cable Television Cooperative, an organization that negotiates programming deals on behalf of smaller distributors.

Turner said no dice and told Cable One that it couldn't carry TBS, TNT or Cartoon Network regardless of its signing a deal through the NCTC.

"Cable One does not have the right to distribute TNT, TBS and Cartoon Network through the NCTC," a Turner spokesman said. The feud comes just as TBS is starting to carry post-season baseball.

In an interview, Cable One President and Chief Executive Tom Might said Turner's actions are "disgraceful and bullying." Might noted that ratings for many of Turner's networks have declined over the last few years -- particularly at CNN -- and yet Turner wants increases to carry the channels.

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Turner, like many big programmers, bundles its channels together when cutting distribution deals with cable and satellite providers. If a distributor wants TBS or TNT, it also has to carry a less popular channel such as Turner's animation network Boomerang or Turner Classic Movies. Viacom, Walt Disney Co. and 21st Century Fox also practice bundling.

Earlier this year, Cablevision Systems Corp. sued Viacom over its bundling of networks. Viacom, Cablevision charged, "effectively forces Cablevision’s customers to pay for and receive little-watched channels in order to get the channels they actually want."

Might worries that rising programming costs and bundling ultimately will lead more people to just stop subscribing to cable in favor of cheaper alternatives for entertainment such as Netflix and Hulu. 

"The subscription video model is starting to stress badly," he said."It already has become so unaffordable for so many."

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At an investment conference last week, Disney Chief Executive Robert Iger said distributors might have to get used to lower profit margins on their video business because of programming costs.

Might countered that video is already not profitable for Cable One and other distributors. "I shouldn't subsidize a break-even or money-losing product to satisfy a programmer's greed."

Turner and Cable One have stopped negotiating. Might said he thought ultimately the two companies would resolve their differences. A Turner spokesman said the programmer is "simply asking that Cable One pay the established and accepted rates already in the marketplace for our portfolio and remain willing to discuss a new agreement that recognizes the strength and value of our networks and the popular programming they offer."

The American Cable Assn., a lobbying group whose membership is made up of smaller cable operators, blasted Turner for yanking TNT and TBS and for its bundling practices.

“ACA has long complained that the bundling practices of the major cable content companies result in cable operators paying for channels they don't want to offer to their customers," said Matthew Polka, the president of the association.

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Follow Joe Flint on Twitter @JBFlint.

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