SBJ/September 18 - 24, 2006/This Weeks News

Comcast plan is setback for NFL Network

Comcast, the nation’s largest cable operator, has taken its first steps toward placing the NFL Network on a new digital sports and entertainment tier, telling its systems nationwide that as of Jan. 1 they will be able to offer NFL Network only on this tier, according to company sources.

During a conference call with its systems last week, Comcast programming executives in Philadelphia said the planned sports and entertainment tier would be the only place its subscribers will be able to get NFL Network at the start of next year, two days after NFL Network’s last live NFL game of 2006. The new tier is expected to cost digital subscribers an extra $5 or $6 a month. The league-owned network has promised to fiercely fight such a move.

With the new tier, Comcast would move NFL Network off of its better-penetrated digital basic tiers, which is where the network is on systems that Comcast recently acquired from Adelphia. (Comcast gained 1.7 million Adelphia subscribers.) Comcast also would move the network off its second-level of digital service, which is where most Comcast systems carry it and where it reaches 7 million subscribers. Comcast’s current sports tier has “far fewer” than 7 million subscribers, a source said.

NFL Network would not comment on Comcast’s potential move. It has contended that cable operators do not have the right to move the channel to a sports tier.

If Comcast is successful in putting NFL Network on its sports and entertainment tier, it would be a huge blow to the channel, which is demanding that operators carry it as part of their expanded basic service, which serves roughly 68 million homes.

The NFL Network recently began a well-publicized $100 million ad campaign in an effort to persuade viewers to demand that cable systems carry the channel or to convince cable viewers to switch to satellite.

As the cable industry’s biggest multisystem operator, Comcast’s move would embolden other cable operators to continue fighting NFL Network’s carriage demands and elevate the debate about the future of digital sports tiers (see sidebar).

Carriage on poorly penetrated sports tiers could be deadly for a channel such as NFL Network, especially since the bulk of its revenue is projected to come from affiliate fees based on the number of subscribers.

NFL Network is in 41 million homes, but the network’s business plan was clearly designed to be double that. That’s why the NFL opted to put an eight-game Thursday-Saturday night late-season package on its network, rather than selling rights to those games to OLN for about $400 million.

Comcast’s plan would be another setback to the network. Last week, Time Warner Cable was scheduled to drop the channel from 1.2 million subscribers in Buffalo, Cleveland, Dallas and Los Angeles. The previous week, Insight Communications said it would not pay a surcharge to carry the live games. Cox Communications still has not made a decision. And negotiations with Charter Communications and Cablevision have gone nowhere. The network has been able to cobble together its subscription base of 41 million via deals with DirecTV, EchoStar and some small cable operators.

Cable operators are irritated by the high license fee NFL Network wants, which is about 70 cents a subscription. They also feel stung by the fact that the NFL sells its successful “Sunday Ticket” package exclusively to cable’s biggest competitor, DirecTV, which is paying $700 million a year through 2010.

Comcast’s planned “sports and entertainment” tier will tentatively include NBA TV, Tennis Channel, Gol TV, Speed TV, Fox Soccer Channel, CSTV and three Fox College Sports regionals. Comcast hasn’t identified the entertainment channels it will include on the tier.

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