'Family Friendly' Plan Sets Cable Rift

[SOURCE: Wall Street Journal, AUTHOR: Joe Flint, Peter Grant and Amy Schatz ]
A split has developed within the entertainment industry as several major cable operators signaled their willingness to give in to regulatory pressure by providing a so-called family-friendly package of programming, despite resistance from many cable programmers. The cable operators are breaking ranks with the major entertainment companies that own most of the country's cable and broadcast channels. The entertainment companies are concerned about the impact of a family-friendly tier on their revenue and who would determine what qualifies as a family-friendly channel. They also worry about what would happen to channels that don't meet that qualification. The escalating tensions likely will have broad repercussions in an industry where relations between cable operators and cable channels are never easy. Operators and entertainment companies frequently bicker over terms for carriage of TV channels: in some extreme cases, disputes lead to TV channels being taken off the air for a few days. What entertainment companies can do to stop cable operators creating a new tier of programming isn't clear. One possibility, industry executives said, is that network owners could contend tiers were in violation of their contracts with cable operators. In the future, large entertainment companies that own numerous networks will likely fight fiercely to get them on family tiers, using their most popular channels as leverage. Even if a few million consumers decided to drop their current cable service and sign on for only family-friendly channels, that could have big financial ramifications. Walt Disney Co.'s ESPN, for example, costs cable operators about $2.50 per-subscriber per-month. If ESPN wasn't a part of a family-friendly tier and lost three or four million of its 90 million subscribers, that could translate into tens of millions of dollars it would have to replace.
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