Seeing Through the Static on Cable TV Rate Deals

The board of a 121-unit co-op wanted to get a bulk discount on a contract with a cable TV provider. As part of the deal, the co-op had to guarantee payment of roughly $7,800 a month – which worked out to $64.90 for each of the 121 apartments. If only 100 shareholders signed up for that provider and paid $64.90 apiece, however, then the co-op would come up short, and it would have to make up the difference.

“They want us to pay a master bill,” says Vito Mangini, director of management at Tudor Realty, whose company manages that co-op.

“The building subsidizes the cost,” explains Despina Leandrou, a building manager with Orsid Realty who has dealt with this issue. “There is not a board that I’ve worked with, which has a fiduciary responsibility to keep costs low, that would accept such a deal.”

Welcome to the brave new world of cable TV services, where suppliers are making unprecedented demands for providing services, and co-op and condo boards are scrambling to keep up with changing technology and changing customer preferences.

In the good old days – just a few years ago – a cable/internet provider such as Time Warner Cable would pay a co-op/condo association an upfront cash bonus and “revenue-share fees” for getting a majority of residents to sign up and for letting the provider do occasional marketing. But with many cable providers now offering bulk discounts only if a property guarantees the equivalent of a 100-percent signup, boards must negotiate more aggressively.

Tara Snow, a partner at the law firm Novitt, Sahr & Snow, represents a building that negotiated just such a bulk deal. “They offered a really cut-rate price,” she says of the provider, which she declines to name. Yet, although the provider wants a guarantee of 100-percent participation, she notes that there will always be units that don’t want to subscribe to a given provider or to cable/internet at all. “So how do you apportion this cost?” she asks. “We’re working through that.”

Veteran real estate attorney Arthur Weinstein says of the all-or-nothing bulk deals: “They are very controversial. For example, in one building, we had people objecting strongly to the concept that you’re locked in for a period of time on those contracts. Technology is moving so quickly.”

Those are just some of the factors to consider. How do you even budget for this, especially in larger buildings or complexes where there may be frequent turnover? The biggest part of preparing a budget is knowing in advance what the dollar amounts are, notes Dawn Lombardo, controller for the Ferrara Management Group. What happens if some subscribers want extras like an NFL package or pay-per-view events? If you’re spending operating-fund dollars on something that benefits only a certain number of people, will you get pushback from residents?

Finding the right answers for their building is now part of every board’s responsibility. Welcome to the brave new – and complicated – world of cable TV.