Updated from 3:18 p.m. ESTCablevision's ( CVC) YES mess seems to have been resolved. An arbitration panel ruled that the New York area cable TV operator must carry the Yankees Entertainment and Sports Network -- the sports channel best known for its carriage of Yankees baseball games -- as part of its expanded basic channel lineup for the next six years, The New York Times reported Wednesday. While Cablevision won't be able to continue its preferred practice of offering YES on an "a la carte" basis -- that is, only to subscribers who specifically order it -- Cablevision won't have to pay as much for the service as YES had requested, according to the Times. The reported deal represents the latest resolution of a series of cable and satellite industry disputes over the terms and cost of programming, particularly sports channels. While the particular circumstances of the Cablevision/Yankees fight make it difficult to extrapolate an industrywide effect from the dispute, the apparent decision hurts one strategy that is occasionally proposed as a way to control cable prices: dividing cable programming into small, a la carte "tiers" for customers to pick and choose from. "The idea of tiering is not lost forever," says Schwab SoundView media analyst Jordan Rohan. "But one might conclude this is a short-term blow to the idea of tiering." Another media analyst points to the reported arbitration decision as another example of the game of chicken played by cable TV or satellite system operators on the one hand, and programmers on the other. So far, no distributor has refused to carry a major channel because it's too expensive, says the buy-side analyst, who spoke on condition of anonymity. "They haven't collided yet. There have been close calls," says the analyst. The Cablevision-YES conflict has been "another one of these close brushes," he says. "There's no question it shows the value of sports programming."
"This is a disappointing ruling for customers who wanted to choose whether or not to pay for the Yankees on cable," Cablevision CEO Jim Dolan said in a statement released Wednesday evening. Cablevision said it was raising the price of its "Family Cable" expanded basic service by 95 cents to cover "a portion" of the cost of including YES. "We are absorbing most of the cost of carrying YES in an attempt to keep prices reasonable despite this ruling," Dolan said. YES issued a statement saying, "Everyone will now get to see YES and its great teams, including the 26-time World Champion New York Yankees and the New Jersey Nets." But YES said it couldn't comment on the terms of the three-member arbitration tribunal's decision because of a confidentiality agreement. The conflict between Cablevision and YES became more than a garden-variety fight over programming costs two years ago, when Cablevision dropped YES -- and thus a season's worth of Yankees games -- from its channel lineup, rather than pay the prices that YES had requested. After a few false starts, the two parties agreed, at the outset of the baseball season, on a one-year deal in which big-ticket Cablevision subscribers got YES, and those subscribing to less-expensive levels of service could order YES either alone or as part of a three-channel tier of sports programming. Subsequently, fellow cable operator Cox Communications ( COX) launched a very public campaign against sports programming costs, especially those of Disney's ( DIS) ESPN. After trading barbs, Cox and Disney eventually settled their differences, with Disney moderating its price increases compared with those of recent years, and Cox agreeing to carry a panoply of ESPN-related programming. Earlier this year, EchoStar's ( DISH) Dish Network pulled its Viacom ( VIA.B) programming in another programming dispute, but soon relented, restoring local CBS station telecasts and various cable channels, and agreeing to add a new channel called Nicktoons. The arbitration decision comes the day before the Senate Commerce Committee is slated to hold a hearing on cable rates. With representatives of Cox and ESPN slated to speak, the hearing at one time promised to be a contentious debate of the theory that cable TV rates are driven by higher programming costs. But with the companies' settlement of their differences, the tensions are unlikely to be as high as they might have been a few months earlier. Cablevision's shares fell 39 cents Wednesday to trade at $21.58. More significant than tiering in programmer-distributor conflicts, says Rohan, is the bundling of what's known as "retransmission consent" with carriage of cable networks. That, reports EchoStar chairman Charlie Ergen, played a key role in the resolution of the Viacom conflict: Viacom would let him carry the "essential" CBS broadcast signal from its stations only if he carried the cable networks Viacom wanted carried, too. "Bundling retransmission consent with the carriage of cable networks -- that's a bigger deal," Rohan said. "That's why the content guys are winning." Says Rohan, "It seems to me, unless a cable operator has the scale of Comcast ( CMCSA), cable networks still have an advantage." Rohan has neutral ratings on Cablevision and Viacom, and an outperform rating on Disney and Comcast.