Contracts Limit Degree of Innovation Video Distributors can Attempt

Programming contracts with linear video distributors normally include contract clauses calling for placement of ad-supported channels on the most-watched tiers. That matters for distributors who want to create “skinny bundles” featuring smaller numbers of channels that can be sold at less cost than the more-traditional bundles and plans.

Some wiggle room exists, but not too much. Agreements with programmers often allow distributors to experiment with some of their customers, said Mark Bowser, chief financial officer for Cox Communications.

Certain channels have to be included in packages taken by 85 percent of customers, he said.

Up to a point, specifically until the percentage of customers buying such smaller bundles reaches about 15 percent, distributors have leeway. After that, contracts would have to be renegotiated. Historically, programmers have insisted on the clauses stipulating their channels must be carried on the most-viewed tiers of service.

Push will have to come to shove, should the skinny bundles prove popular.