SBJ/November 13 - 19, 2006/This Weeks News

Talks with Comcast are rolling

Avoiding the bitter public battles that have become a hallmark of previous contract renewal negotiations with broadcasters, Comcast quietly is wrapping up wide-ranging deals with both Disney and Fox that will keep ESPN and some of Fox’s sports offerings on the nation’s largest multisystem operator for up to seven years.

The deals are expected to be finalized by the end of the year, and will include everything from carriage of broadcast and cable networks, video-on-demand and high-definition programming, according to sources who asked not to be identified because of the sensitive nature of the talks. This means Comcast will carry broadcast networks ABC and Fox for the next seven and five years, respectively.

Unlike past negotiations that brimmed with acrimony, these deals are being completed in private and come just weeks after Comcast Chairman and CEO Brian Roberts called for an industry debate on the cost of sports networks.

While Roberts called for cost containment, ESPN’s deal will have the all-sports network getting the same annual 7 percent license fee increases for at least the next seven years — the same rate ESPN cut with MSOs Charter and Cox two years ago. Comcast currently pays ESPN about $3 per subscriber per month, which makes the network the most expensive.

Deal terms are scarce because of the sensitive nature of the talks. And they are still changing, since the deal is not finalized. But one winner appears to be ESPN Deportes, which will gain carriage on Comcast’s Spanish-language tier, Cable Latino, which has launched in 15 markets with large Hispanic populations, such as Miami, San Francisco and Albuquerque, N.M. Previously, Comcast did not carry ESPN Deportes.

Comcast’s VOD platform also looks to be a winner, as the cable operator convinced ESPN to make some of its programming available on the MSO’s VOD system for the first time. The programming will be a mix of free and paid VOD, mainly coming from Disney’s entertainment networks. ESPN has long resisted making its programming available on cable operators’ VOD platforms, especially Comcast’s, which has pioneered a “free VOD” model. ESPN has always believed that subscribers should pay for all VOD content, so the fact that it will offer some for free comes as a surprise.

So far, the two sides have been unable to come to terms on ESPNU and the network’s broadband channel, ESPN360. Comcast balked at the price tag for ESPN360, which is unknown, and ESPN balked at Comcast’s demand to place ESPNU on poorly penetrated sports tiers. Comcast currently does not carry either service.

Meanwhile, Fox is closer to finishing up its deal than Disney. The Fox deal will see Comcast pick up all of Fox Sports Net’s HD games for the first time. Next year, FSN plans to have close to 1,000 HD games, double the number from this year. In the past, Comcast refused to air most of FSN’s local HD telecasts.

As an example of the deal’s complexity, Comcast also will gain from its negotiations with Fox. The Comcast-owned Golf Channel will be moved to News Corp.-owned DirecTV’s most widely distributed tier, Total Choice, which has 14 million subscribers. Previously, it was on the Total Choice Premier package, which has 2.2 million.

The Fox deal will not include the company’s regional sports networks, a “handful” of which have contracts expiring at the end of the year, a source said. Fox plans to negotiate deals for those networks separately.

In addition, the deal, which is believed to be for five years, helps News Corp.’s nonsports networks, including Fox Business News, which hasn’t launched yet, and Fox Reality Channel, which launched last year. The networks are surprisingly launching on Comcast’s most highly penetrated digital tier, D-1.

The Disney and Fox deals are significant since they involve what is known in the cable business as retransmission consent. In the past, retrans negotiations have led to some of the most public programmer-operator fights in cable history, with broadcasters trying to force cable operators to give carriage to several new channels.

Bitterness between the two sides reached an extreme six years ago, when Fox pulled its broadcast signal from Cox Communications’ systems for several days and Time Warner Cable dropped ABC from several systems for two days during a May sweeps period. The Federal Communications Commission ended up fining and reprimanding Time Warner Cable.

This year, retrans negotiations have stayed private, even though Disney and Fox are negotiating with the two biggest cable operators, Comcast and Time Warner Cable.

The Time Warner Cable deals with Disney and Fox are scheduled to be finished several weeks after the Comcast ones.

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