Cablevision serves communities surrounding the metropolitan New York region

Despite the tight economy for most Americans, executives at some of the nation’s largest cable players will enjoy millions from their contract extensions, bonuses, and eye-popping stock options that could net upwards of $10 million more for a select few.  And you thought your rate increase was due to “increased programming costs.”

Cablevision is where the real Money Party has just gotten started.  The top three executives alone could receive a combined $50,000,000 next year… that is fifty million dollars, just for running a regional cable company with just north of three million subscribers.

Here is the breakdown:

Dolan

Cablevision CEO James Dolan: Cablevision has always been under the control of the Dolan family, who own a controlling interest in the stock.  James Dolan gets a five-year extension in his contract, with a base salary of $1.5 million per year plus a bonus of up to four times that amount.  In 2010, Dolan is also entitled to an additional bonus package in cash and equity worth around $7 million.  He is also on track to get that same bonus each of the next five years, but only if the company does well.  Dolan is also CEO of Madison Square Garden/MSG/Radio City Music Hall.  For managing those assets, he’ll receive an extra $500,000 in salary, a bonus up to four times that amount, and an extra cash and equity bonus expected to be about $1.75 million per year.

Dolan founded Cablevision in 1973.

Ratner

Cablevision Vice Chairman Hank Ratner: Ratner gets a base salary of $500,000 a year, an annual bonus up to four times that salary, $1.2 million annually for his role with MSG, and extra cash and equity around $1.4 million annually.  And just because he’s a great guy — a one-time stock award worth $1.75 million due on March 31, 2010.  But wait, there’s more.  He also deserves extra cash and equity as MSG’s chief, targeted at $5.4 million in 2010 and each year thereafter.

Ratner joined Cablevision in 1987.  Ratner helps to set corporate direction and strategy, and is the primary executive overseeing major business partnerships and transactions.  Prior to being appointed Cablevision vice chairman, he served as vice chairman of Rainbow Media Holdings, the company’s programming subsidiary.

Rutledge

Tom Rutledge, Cablevision’s chief operating officer: He’ll get $1.63 million annually in salary, plus an annual bonus up to four times that amount.  He’s a special guy, so he also gets a “special payment” of $7.75 million within ten days of putting his ‘John Hancock’ on the new contract.  Call it a signing bonus.  But he also gets extra cash and equity compensation aiming at $6.8 million in 2010.

Cablevision isn’t alone is spreading around the walking around money.

Liberty Media, one of those programmers that keeps upping the rates charged to cable and satellite providers, who in turn pass those increases on to you, have a reason for doing so.  Their salary costs keep going up for the special few on the top floor.

Maffei

Greg Maffei, prexy-CEO of the company, just got his own five year contract renewal taking effect January 1st.  He’ll earn a base salary of $1.5 million per year, with a guaranteed 5 percent raise every year and an annual bonus amounting around $3 million.  But he’ll also get more than 10 million options of Liberty’s three stocks, most in the high-tech Liberty Interactive, which is developing online applications and services.

What do you get?  A rate increase and programming you don’t want but have to pay for, and now you know why.

I realize this is a bit off topic for us, but I was bemused to learn Cablevision, the cable operator in suburban New York (and elsewhere), has launched iO TV Quick View, three new channels that display nine different kids, sports and news networks all on one screen.

Who is this for?  I suppose the carpel tunnel-suffering channel surfer that has worn his finger out moving up and down the cable dial looking for something to watch and never making it all the way to the end of the lineup.

Cablevision says these three channels will let viewers highlight each window showing a network and, with one button press, jump to the channel they want to see.

No doubt these three channels will be part of the pointless bragging rights cable companies play over the number of channels they offer customers, as if most are still concerned with counting them.

The 500 channel universe already threatens to become littered with networks like Cat Fur Entertainment, Dorm Room Cooking Channel, Log Rolling 24/7, Uncle Fred’s Aquarium TV, and the Uighur News Network, before someone came up with this.

Channel 670 (like you’ll find that):  Kids Quick View channel features box views of Disney Channel, Cartoon Network, Nickelodeon, Boomerang, Discovery Kids, Disney XD, Nicktoons, Nick Jr. and Kids Thirteen.

Channel 671: News Quick View channel features News 12, News 12 Traffic & Weather, MSNBC, CNBC, CNN, Fox News Channel, CNN Headline News, Bloomberg TV and BBC World News.

Channel 672: Sports Quick View, featuring MSG, MSG+, YES Network, ESPN, ESPN2, Speed Channel, Golf Channel, SportsNet NY and Versus.

Versus TV

I can already guess there will be some clashing between Cartoon Network’s more-adult oriented cartoons and Nick, Jr., among others.  Putting channels with Glenn Beck, Nancy Grace, and Ed Schultz all on one channel will blow a hole in the fabric of space on 671, and few will pay attention to actual sports on 672 when the scantily clad ladies on Versus turn up… regularly.

“Our focus in the development of iO TV Quick View has been on discoverability and helping our customers find the perfect program to watch,” Cablevision’s SVP of strategic product development, Patrick Donoghue, said in a prepared statement.

“With so many channels to choose from, this new enhancement allows us to present current options in a number of popular programming categories, literally at a glance. And the end result is a visually beautiful presentation with easy navigation both within the mosaic and to the specific channels being spotlighted.”

Yeah, you’re going to pay for it.

Back in the mid-1980s, I first got involved in the fight against the cable television industry’s consumer abuses.  Cable had gotten cocky, and began to use their monopoly position to extract ever-increasing amounts of money from consumers, providing lousy service and engaged in anti-competitive abuse all over the marketplace.  Back then, competition for the overwhelming majority of consumers came from just one place – giant 10-12 foot satellite dishes.  These were the days before Direct Broadcast Satellite providers like Echostar/DISH and DirecTV (and PrimeStar, the cable industry’s own satellite provider that claimed to ‘compete’ with cable) provided competition to cable.

In the mid and late 1980s, your choice was a giant TVRO (TV-Receive-Only) satellite dish in the backyard or you hooked up to cable.  A tiny handful of communities had wireless cable, a service that was supposed to compete with cable but was seriously limited in channel capacity (in many communities, wireless cable ended up providing access to ‘adult’ content that cable wouldn’t carry as their biggest selling point) and quickly faded from view by the mid 1990s.

The abusive practices were all over the place back then:

• Cozy arrangements between cable companies and local governments resulting in outright bans of satellite dishes for aesthetic reasons, using zoning laws either prohibiting their installation or requiring landscaping to hide them from view (to the neighbors and to the satellites they were trying to receive, making them useless), or requiring expensive permit fees;
• A rush to scramble/encode satellite signals and then require consumers to purchase, outright, a costly descrambler from General Instruments called the VideoCipher II for $399 (or have it incorporated within a satellite receiver that typically cost $800-1000 and was available only for purchase), only to be replaced a few years later by the VideoCipher II+ (which consumers were also forced to purchase).
• Cable companies, which had ownership interests in most cable networks (which was nearly a pre-condition for getting your network on cable systems), often had exclusive rights to sell that programming, and frequently provided it “only on cable” or to satellite customers who could not subscribe to cable.  Some networks refused to sell to competitors, including dish owners, at any price.
• Anti competitive pricing was by far the biggest problem.  Prices for programming packages encrypted on satellite were sold to consumer dish owners in small or large bundles at pricing comparable or above what cable subscribers paid, despite the fact all of the costs to provide, install, and service reception equipment were borne by consumers.  No cable TV company overhead, no infrastructure or staffing and support costs, yet satellite dish owners were expected to pay the same high costs that cable subscribers paid, and also purchase their own equipment.  That was quite an investment: a 12 foot dish, satellite reception equipment, decoder, and installation routinely ran well over a thousand dollars, depending on the equipment and installation complexity, and that was before programming costs were factored in.

Rural consumers really got the short end of the cable stick, not able to buy cable even if they wanted to, and forced to spend big money, upfront, just to get satellite TV.

That inspired the consumer groundswell of support for legislation to stop the abuses, which overrode a White House veto by President George H.W. Bush.  Among other things, the Cable Act of 1992 put a stop to exclusive programming contracts which denied competitor access to cable networks.

Without that legislation, there would be no DirecTV or DISH today.

Now the cable industry is back, high-fiving over their victory to have the 30% ownership cap dispensed with, and are now taking on the next provision of the 1992 Cable Act they don’t like — the ban on exclusive programming contracts.

That’s right, it’s Back to the Future as Comcast and Cablevision take their legal business to the same friendly DC Court of Appeals that savaged the 30% cap, now seeking an immediate repeal of the exclusivity ban as well.

Oral arguments start September 22nd.

Most amusing of all is the argument made by Comcast and Cablevision, who claim despite the time and attention they are spending on overturning the law, not to mention the legal expense, the practical effect of an end to exclusivity bans would be… absolutely nothing.

“Widespread withholding is now implausible,” said the attorneys in the filing. “[T]here are proportionally fewer services to withhold. The limited withholding that may still occur will not threaten competition: most vertically integrated services have closely similar substitutes, and, when competitive MVPDs [multichannel video programming distributors] have sunk massive investments, withholding can no longer cause market exit.”

That’s right.  Big cable companies throw money away on attorneys who will presumably fight this case and the inevitable appeals for the next few years for no practical change whatsoever in the current competitive landscape.  The believe people will accept that an industry that had to be forced by regulation to compete on a level playing field will continue to respect that playing field once they plow it up.

Just trust us.  We’re your cable company.  You love us.

So it could be “nothing” as they suggest, or it could be a defensive response to challenges of their business plans from telephone company TV and online video competition.  Would you subscribe to a competitor that didn’t offer the networks you wanted to see because they were “exclusively” available only from the cable company?

Be it usage caps, consumption billing, exclusive contracts, “price protection agreements” that hold customers in place for 12-24 months (or longer), the war to keep consumers from choosing when, where, and how they access content is becoming fully engaged.

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Satellite television in the mid-1980s was highlighted by Granada Television

When Verizon FiOS is moving in on your turf, one way to preserve customers is to hand out free Wi-Fi service for your customers on-the-go.  Cablevision’s Optimum Wi-Fi service aims to do just that, with thousands of Wi-Fi hotspots installed across metropolitan New York, Connecticut and New Jersey.  Many hotspots can be found at shopping centers, on main streets and train platforms, in parks, marinas, and at sports fields.  The company claims Optimum WiFi, running for a year now, is already available at nearly 96% of commuter rail platforms and station parking lots serving Long Island and Westchester County.

Now the company wants to extend access into the trains commuters across the area ride every day and evening.  The New York Metropolitan Transportation Authority has been seeking proposals to provide Wi-Fi to customers.  Cablevision has filed a proposal to provide the service in partnership with the MTA, providing access to Cablevision customers at no charge, and perhaps sharing revenue with the MTA for non-Cablevision customers signing up for temporary access.

“As one of the nation’s leading telecommunications providers and a well-established local company that has already made a significant commitment to deploying Optimum WiFi across the New York metropolitan area, Cablevision is uniquely positioned to quickly and seamlessly deliver a high-quality WiFi network across the LIRR and Metro North railroad system,” said Kevin Curran, Cablevision’s senior vice president of wireless product development. “We have delivered a proposal that would provide significant benefits to all parties, and are excited and encouraged by the prospect of providing Optimum WiFi service to the MTA and its ridership. We look forward to participating in a process that will result in the availability of fast and reliable WiFi service on the railroads.”

[flv width=”438″ height=”360″]http://www.phillipdampier.com/video/Intro to Optimum WiFi.flv[/flv]

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p style=”text-align: center;”>Cablevision’s Introduction to Optimum WiFi

Opponents of Net Neutrality regularly dismiss concerns about providers blocking, interfering with, or rejecting content as little more than scare-mongering.  Even in the case of competitors, they assure us, no provider would ever consider getting between the customer and the services they choose to use.  Therefore, we don’t need Net Neutrality provisions enacted into law.

Wouldn’t you know, Cablevision-owned Newsday, a newspaper on Long Island, just unknowingly illustrated what happens when a company puts its own competitive and ownership interests ahead of not only the customer, but also newspaper common sense.

As any newspaper reader knows, the local cable and phone companies are not shy about advertising their products.  For years, Verizon has been spending several hundred thousand dollars a year to run full page ads touting its FiOS service on Long Island.  Such regular advertisers are hard to find these days in the ailing newspaper industry.  Last year, Newsday itself was put up for sale, acquired by Cablevision for $650 million dollars.

Now that the local cable company owns Newsday, they’ve decided to reject advertising from Verizon for its FiOS service. Verizon is now Cablevision’s biggest competitor, providing fiber optic service for television, broadband, and telephone service across Long Island.

The New York Times reports that Newsday has basically told Verizon “don’t call us, we’ll call you” when the phone company inquired about advertising space.

Newsday won’t comment about the reasons why Verizon’s ads were rejected, other than issuing a generic statement:

“We do not comment on specific ads except to say that Newsday, like every other media company, including The New York Times, accepts or rejects advertising at its own discretion,” said Deidra Parrish Williams, a Newsday spokeswoman.

Eric Rabe, a senior vice president of Verizon, told the Times that was fine with him, noting that’s money from Verizon’s pockets not going to feed Cablevision’s pervasive presence across Long Island.

The Dolan family, which runs Cablevision, dominates Long Island, running the cable system, a popular news channel – News 12, and is still the primary place consumers go to acquire broadband service.  Now they also own the biggest newspaper on Long Island as well.

This hasn’t been the first instance that Cablevision-owned Newsday has gotten embroiled in ethical controversy.  The Times notes:

In January, the top three editors at Newsday did not report for work for a few days amid reports that they had been fired or had resigned in a dispute with Cablevision over the paper’s coverage of the New York Knicks basketball team, which is also owned by the company. The editors returned to duty, and neither they nor the company offered a full explanation of what had happened.

Newsday also recently rejected advertising from the Tennis Channel, which is upset with Cablevision because it will not carry the channel.  The Tennis Channel was rebuffed by Newsday when it tried to buy ads inviting viewers to find the network on Verizon FiOS or satellite.

Kelly McBride, the ethics group leader at the journalism foundation Poynter Institute, was troubled by Newsday‘s antics.

“Newspapers accept ads at their own discretion, but they generally set the bar pretty high for rejecting advertising, because they don’t want to be seen as denying access to free speech,” she said. She added that appearing to deny an ad for competitive business reasons, rejecting an ad that is not obviously offensive or failing to explain the rejection, could undermine a paper’s credibility.

Could a company that considers it has the discretion to reject competitors’ access to its properties also extend that notion to its broadband service?  If a competing video provider used broadband to deliver access to its channel lineup, would a competitive threat like that be welcome on Cablevision’s Optimum Online?  How about criticisms of the company or its assets?

Newsday has chosen loyalty to its owner over lucrative advertising revenue to help sustain the paper.  That has disturbing implications for the broadband world as well.

Enacting Net Neutrality protections into law guarantees a company never finds itself in a quandary over where loyalties lie.  These protections guarantee that providers do not hamper, block, or interfere with the online services customers want to utilize.  No “competitive reasons” need ever be used as an excuse to block service from consumers.

Cablevision has not engaged in any online bad behavior to date, but why wait around to find out what the future holds?