SBD/September 9, 2011/NFL Season Preview

ESPN Denies Report That Dish Network Could Drop Channel From Its Basic Package

Bodenheimer (r) says ESPN won't add an NFL-specific surcharge on subscriber fees
ESPN is denying a story in Friday's N.Y. Post claiming that Dish Network could drop the channel from its basic package over growing rights fees. The net issued a statement saying, "The Post story is untrue. We have had no discussions of this nature with Dish" (John Ourand, THE DAILY). The POST's Claire Atkinson in the story reports the dispute between Dish and ESPN "was given new life" Thursday when ESPN announced its eight-year extension with the NFL. Sources said that Dish is "negotiating a new carriage renewal deal with ESPN and is balking at passing along big fee hikes from sports providers to its satellite-TV customers." Dish wants Disney to "offer the sports network on a separate tier from its basic package so that non-sports fans aren’t penalized." Cable, satellite and telecom companies are "bracing for fee increases in light of ESPN's new NFL deal." In the past 18 months, ESPN "has also paid big fee increases for Wimbledon tennis, Pac-12 and BCS college football." ESPN already is the "highest-priced network," estimated at $4.69 a month per subscriber, and SNL Kagan Analyst Derek Baine said that the network's "annual increase is around 8 percent, compared with an industry average of 3 percent." But one source indicated that ESPN "was going after a double-digit increase in current negotiations" (N.Y. POST, 9/9). ESPN/ABC Sports President George Bodenheimer on Thursday "was adamant there will be no NFL-specific surcharge on subscriber fees ESPN charges to distributors." But on Long Island, Neil Best notes "rising rights fees for all sports inevitably are passed on to consumers through television bills, whether they are sports fans" (NEWSDAY, 9/9). Bodenheimer said that ESPN "will 'never' slap an NFL surcharge on multichannel ops, but he also underscored numerous times how the deal 'enhances the value of a cable subscription'" (CABLEFAX DAILY, 9/9).

THE COST OF DOING BUSINESS: USA TODAY's Michael Hiestand notes ESPN "will be able to create lots of new NFL programming" with the eight-year extension. ESPN gains access "to 500 hours of new programming annually that can include having 'NFL' in shows' titles, something that can only be done with league approval." As part of the new arrangement, "Sunday NFL Countdown" will expand from two to three hours and start at 10:00am ET, beginning this weekend. Also, viewers will be able to watch ESPN's "MNF" on iPads (USA TODAY, 9/9). ESPN Exec VP/Content John Skipper said, "The value of the NFL to us is the ubiquity of the sport across our platforms all the time. It’s just stupendous for us. It’s daily product -- we don’t have a day without the NFL." Skipper called the new deal "fiscally prudent" for ESPN, adding, "We will be able to absorb and continue to grow" (N.Y. TIMES, 9/9). ESPN will pay an estimated $1.9B annually to the NFL through '21, and in Milwaukee, Bob Wolfley wrote, "No Super Bowl, no conference championship, no playoff games for ESPN, except a wild card game at some point, maybe. That is beyond baffling. It’s stupefying. That kind of money should be able to buy everything." While ESPN gains 500 more hours of NFL program each year, Wolfley wonders, "How much NFL programming is too much?" (JSONLINE.com, 9/8).

PAY AS YOU GO: The WALL STREET JOURNAL's Sam Schechner reports ESPN "won't have to swallow the entire jump in costs from one contract to the next all at once." A source indicated that the "amount it has been paying for NFL games rises over the course of each deal." Nomura Equity Research analyst Michael Nathanson estimated that ESPN's payments to the NFL "will jump 24% in 2014 before resuming a compound annual growth rate of 6%" (WALL STREET JOURNAL, 9/9).
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