SBJ/November 20 - 26, 2006/This Weeks News

Carriers ready for long fight

Italia Commisso Weinand’s face lit up last week when a reporter approached her at a black-tie dinner for cable executives in Washington, D.C., and asked whether her company would carry the NFL Network this year.

The senior vice president of programming for the country’s seventh-largest multisystem operator, Mediacom Communications, excitedly grabbed the reporter by the arm and practically shouted her answer: She would only do a deal if she could put NFL Network on a digital sports tier.

“There are some networks that are unfairly priced,” Weinand said. “NFL Network is one of them.”

Time Warner’s Dressler: “The whole
thing … needs to be re-examined.”

Weinand’s reaction was hardly unique. Several other high-ranking MSO executives had the same response during the gala at the Grand Hyatt last Wednesday. They believe that the 70 cents per subscriber per month license fee that the NFL Network is trying to get is too high, and they want to be able to put the network on digital sports tiers.

And, with the NFL Network just days away from launching live games for the first time, operators believe they have the upper hand in the dispute. Neither side expects to cut a deal by the network’s opening Thursday night telecast. In fact, both sides are gearing up for a fight that they expect to last well into next year, or longer.

There are a number of reasons for the optimism coming from cable circles, not the least of which is the trend of placing the network on sports tiers. Cox already has placed the network on a digital sports tier; Comcast plans to move it to a “sports and entertainment” tier in January. The NFL Network has asked a federal judge to clarify whether Comcast’s contract allows it to move the network to a sports tier. Cox executives say they have not received such a suit.

Other big operators, such as Time Warner Cable, Charter and Cablevision, have refused to carry the network altogether.

But last week’s jubilant attitude within the cable industry also reflected newly aggressive tactics cable operators are using during this dispute.

Those tactics were in play starting last Tuesday, when the NFL and DirecTV representatives were treated harshly during a hearing on sports programming before the influential Senate Judiciary Committee. Outgoing Committee Chairman Sen. Arlen Specter, R-Pa., stopped just short of accusing the NFL of violating antitrust laws by putting live games on its network. The bashing was bipartisan, as incoming chair Sen. Patrick Leahy, D-Vt., was similarly tough on the NFL and DirecTV.

Comcast executives, in particular, have become convinced that the high cost of sports rights “are spiraling out of control,” and they are willing to have an open dialog to look into fixing them, the MSO’s Executive Vice President David Cohen said.

The issue could come to a head as early as the first week in December, when the Senate Judiciary Committee convenes a hearing on “vertical integration,” or when companies such as Comcast and News Corp. own both program networks and distribution platforms.

Some cable operators believe they have to make a strong public stand against rising sports rights, since they are usually the ones hauled before Congress when they raise rates. Cable companies frequently cite the rising cost of sports networks as a reason for increasing their own customer rates.

“One of the things Washington is focused on is the cable companies raising rates,” said Bob Wilson, Cox senior vice president of programming, during the Fantasy Sports Association’s Sports Media & Technology conference last week, which was presented by SportsBusiness Journal and SportsBusiness Daily. “[Raising rates are] all we hear about from our local constituencies.”

Speaking at the same conference, Fred Dressler, Time Warner Cable’s executive vice president of programming, said the cost of sports affects “the entire food chain in sports,” from players’ salaries to the cost of a hot dog.

“We do not really lay the blame, to the extent there is any, on the networks,” he said. “They have escalating costs that they have to deal with. … The whole thing is in a position now where it needs to be re-examined.”

Right now, NFL Network is at the center of the sports rights storm. But network officials are clearly hoping that viewers will be irate when they realize their cable provider will not be carrying the first live regular-season game in the network’s three-year history Thursday night when the Denver Broncos play the Kansas City Chiefs.

Cable operators hope the reaction will be muted, especially since local broadcast stations will air the games in the competing teams’ local markets. But Time Warner Cable’s Dressler acknowledged last week that his company’s customer call centers could be flooded with complaints.

“I don’t think we’re so naïve as to think that we’re not going to get phone calls as we get closer to Thanksgiving Day,” he said. “As the season goes along, if any of the games on the NFL Network turn out to be particularly crucial to the playoff standings, people are going to want to see that product.”

Still, Dressler reiterated that he was unwilling to meet NFL Network’s demands to be given expanded basic carriage because it would mean raising rates for the “85 percent of our customers” who would not watch the network. “That’s the dilemma that we face. We made a calculated decision to hold the line.”

Cable operators are rooting for Dressler to hold the line. At last week’s black-tie gala in Washington, one longtime programming executive admitted to “pulling for Fred to claim just one more big win” before he officially retires at the end of the year.

But none of the operators expect the NFL Network to go away. It is well-funded, and the league’s owners are prepared for a long fight.

“I am told that at a recent owners meeting, they were unanimous in their support of what the management team is doing in regards to the NFL Network,” IMG Media Vice Chairman Barry Frank said at last week’s conference. “This is only about money. NFL Network is asking for 80 cents a sub, [MSOs] are prepared to offer about 25 cents a sub. Eventually they’ll end up at about 40 to 45 cents a sub.”

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