• by David Goetzl , May 7, 2013

Months after Time Warner Cable stopped carrying Ovation, the network still has a highly visible plea on its Web page asking for help in getting the cable operator to bring it back. Recently, a Los Angeles Times columnist spoke with Ovation COO Chad Gutstein, who suggested the arts channel is at the mercy of distributors because it’s not part of a major media company.

He’s right. If Ovation were owned by News Corp. or NBCU, Time Warner Cable (TWC) subscribers would still have access.

It’s simply the leverage game (which Cablevision is trying to stop in a suit against Viacom), where media giants make it more attractive for operators to carry popular channels if they’ll offer some niche stuff as well.

Which is why a cable operator thinking an Aereo court victory will give them negotiating muscle vis-à-vis Big Media appears short-sighted. TWC CEO Glenn Britt appears to be considering the prospect.

No one should underestimate Britt. He probably knows something no one else does. Anyone suggesting he’s short-sighted is probably very short-sighted themselves.

He has not been explicit. But Britt appears to be advancing a scenario where if Aereo is found legal, cable and operators might be able to eliminate or reduce carriage fees paid to local broadcasters -- known as retrans fees. Aereo, which streams live TV online, believes it can use antenna farms to transmit over-the-air signals without paying those dollars.   

The major broadcasters are trying to shut Aereo down in the courts. It seems clear they’re less concerned about its viability as a business and more fearful the likes of Britt will look to launch similar technology.

“If it is found to be legal, then I think it has very interesting implications for the whole broadcast and broadcast network ecosystem and for the future of retrans,” Britt said recently. “Obviously, it would give people a route to receive the signals that are otherwise free through the air without paying retrans fees.”

Broadcasters like Fox and CBS have indicated they could shift to pay-TV distribution in the event an operator tries to subvert the payments. But because of bundling, it’s hard to imagine they would even need to.

Take the soon-to-be 21^st Century Fox. It would likely have to tread carefully to avoid anti-trust violations and Congressional attention. But if an operator deploys Aereo-like technology to avoid paying retrans, it’s hard to imagine carriage fees for FX and Fox Sports 1 not increasing enough to make up the shortfall for the Rupert Murdoch giant.

The same dynamic would likely apply with Disney and NBCU. Yes, some operators have long-term deals with them, but ultimately Disney has ESPN and NBCU a fleet of networks to help soften any cut in retrans fees. CBS may have less leverage, but has Showtime and who knows, the TV Guide Network might become the next AMC.

Charter CEO Tom Rutledge suggested Tuesday that bundling could be a buffer against Aereo or a copycat. And his company shouldn’t bank on any relief.

He said he thinks Fox or CBS could go to pay TV. But he indicated he doesn’t envision any major change in how the overall pie in carriage payments is determined.

“Whether (Aereo) would dramatically change the business?” he said on an earnings call. “I don’t think it would … Most of the broadcast companies own other product that’s cable exclusive … so I really don’t see it as a game-changer, regardless of whether its legal or not.”

Unless the courts or Congress or the FCC somehow takes down bundling, Rutledge would appear to be right. So, Ovation is likely to continue to be off Time Warner Cable unless a Big Media entity buys it.