GSN/Cablevision Carriage Complaint Hearing Begins

Such re-tierings are rare except after long and contentious contract negotiations, which wasn't the case with Cablevision, network CEO David Goldhill said in testimony. GSN filed the complaint in docket 12-122 after Cablevision relocated the channel to a specialty sports tier, since renamed its Sports and Entertainment tier. "GSN doesn't belong" in the Sports and Entertainment tier, Schmidt said, saying the re-tiering involved Cablevision elbowing out rivals to two of its networks, We TV and now-defunct Wedding Central -- which would violate Section 616 of the Communications Act. Cablevision received close to 30,000 complaints from subscribers in the days after the re-tiering and ultimately lost more money than it saved, while GSN has suffered lost advertising revenue and license fees, Schmidt said. Being less seen in New York City means more difficulty getting attention from advertising agencies or publicity for new programming, Goldhill said. "New York is still the media capital." In his eight years as CEO, "This is the single worst thing to happen to us," Goldhill said.

Saying roughly nine percent of Cablevision subscribers now have access to GSN, and Wedding Central had far deeper potential audience reach on Cablevision than it did on other cable carriers' systems, Schmidt said, "This is what discrimination looks like." The cable company also didn't have arm's-length bargaining with We TV or Wedding Central, and neglected to enforce certain contractual provisions that it would enforce on nonaffiliated channels, Schmidt said. Cablevision also tried to use the re-tiering as leverage to get Wedding Central onto DirecTV, which partially owns GSN, Schmidt said. But DirecTV management previously had made clear the satellite company wouldn't involve itself in GSN programming issues, Goldhill said. ''I got a very explicit 'no.' Their ownership of us is a passive one."

"Nothing ... can change the fact the decision to re-tier GSN had nothing to do with We or Wedding Central," said Jay Cohen, counsel for Cablevision. "All those [DirecTV] conversations were after." Instead, Cablevision made the re-tiering decision after looking at data taken from set-top boxes of a sample of subscribers that showed GSN "way down at the bottom of popularity," Cohen said. 'Cablevision made a rational business judgment. A network being watched by only a few of its 3 million [New York City-area] customers was too expensive to carry."

Much of the case involves the sides' conflicting answers to whether GSN is a "women's network." "If [GSN, We and Wedding Central] are not similarly situated, we can discriminate," Cohen said. But overlapping audiences, similar advertisers, ratings and license fees "speak to them being similarly situated," Schmidt said. A 2008 We TV presentation also listed GSN as a competitor, he said. GSN's target audience and advertising target has for years been women, especially aged 25-54, and it considers its competition such networks as Oxygen, Lifetime and We, Goldhill said.

The network's major advertisers are consumer products companies selling soaps, cosmetics and hair-care products and pharmaceutical companies, and the network doesn't try to sell to advertisers seeking male consumers, Goldhill said. But in a 2009 presentation to Comcast, GSN put Oxygen and Lifetime in a women's entertainment category, and itself in games, Cohen said. "The actual audiences are different. The advertising is different. These networks couldn't be less similarly situated," he said. GSN's audience skews heavily female only in the 55-and-up demographic, Cohen said. Among the advertiser-coveted 25-54-year-olds, viewership is roughly 50/50 male to female, he said. GSN has been one of the few networks to grow its female audience in recent years, going by Nielsen data, Goldhill said.

The lengths of Section 616 prohibitions may become an issue during the hearing​. Sippel at one point asked Schmidt whether his reading of the rule would mean We TV or Wedding Central couldn't use Cablevision-purchased office supplies. Section 616 contains rules preventing a multichannel video programming distributor like a cable operator from unreasonably restraining unaffliated video programming vendors through video distribution terms or conditions.

The hearing is expected to continue through next week and feature a variety of economists and analysts brought in by both sides, as well as Tom Montemagno, Cablevision executive vice president-programming. Sippel hasn't set a separate date for closing argument.