SBJ/April 16 - 22, 2007/This Weeks News

Big Ten Net’s subscriber fee shocks MSOs

With the ink barely dry and tempers slowly calming after cable’s rancorous deal with MLB over the Extra Innings package, the industry’s biggest operators are shifting their sights on their next big sports media battle: the Big Ten Network, which launches in August.

The network plans to show about
35 football games this year, plus
160 basketball games.

Last month, the channel, jointly owned by Fox Cable Networks and the Big Ten Conference, sent its initial offer to multisystem operators, who are immediately balking at the high license fee the network is seeking.

According to those letters, Fox Cable is asking operators in Big Ten markets to pay close to $1.10 per subscriber for analog distribution — the highest level of distribution that MSOs offer.

One wrinkle that is already rank-ling cable operators is Fox Cable’s insistence that every part of the eight states that make up the Big Ten schools be considered part of the local market. For example, Philadelphia is nearly 200 miles from Penn State’s main University Park campus. But Fox is demanding that Comcast put the Big Ten Network on its analog tier in Philadelphia at $1.10 per subscriber.

Meanwhile, the channel is seeking around 10 cents per subscriber from cable systems that are not in Big Ten markets. In those non-Big Ten markets, Fox Cable will accept carriage on cable’s digital platforms. MSOs that cut in-market deals also are expected to get a financial break on the out-of-market systems.

The battle is shaping up to be similar to cable’s tussle with Major League Baseball. A deal has been reached with DirecTV, which has agreed to carry the channel on its Total Choice package, which has nearly 16 million subscribers. It’s not clear how much DirecTV paid for the channel. Because DirecTV has one national feed that includes the 42 states that don’t have Big Ten schools, the rate has to be much less than the rate Fox Cable wants in-market cable operators to pay.

Plus, DirecTV signed the deal when News Corp. controlled both the DBS operator and Fox Cable Networks. News Corp. is in the process of selling DirecTV to Liberty Media.

While no one wanted to speak on the record, the channel’s initial pricing offer is being excoriated by top cable executives. The two biggest MSOs — Comcast and Time Warner Cable — have most of the subscribers in the Big Ten markets.

While it’s well below the $3 per subscriber rate that ESPN commands, the rate is significantly higher than other channels that have had trouble gaining distribution. NFL Network, for example, charges around 70 cents per subscriber and the planned MLB Channel will ask for about 25 cents per subscriber. The $1.10 fee is comparable to many regional sports networks, but cable operators are loath to pay it for a channel that has yet to launch and will not feature the best Big Ten games, which will be on ABC and ESPN.

Fox Cable and Big Ten officials feel they have a compelling sell, as the network is about much more than poorly rated Olympic events. It is planning to televise around 35 Big Ten football games, 100 men’s basketball games and 60 women’s basketball games. The conference also plans to have a studio on every campus to add local productions.

Part of the network’s pitch to cable operators will emphasize broadband and video-on-demand content that will be developed from the channel and will be included in the base rate. Channel executives also plan to emphasize local ad sales opportunities. That’s where local cable systems get to sell two minutes each hour to local advertisers.

Fox Cable has gained a reputation for publicly scrapping with cable operators in the past. But with Michael Hopkins, executive vice president of affiliate sales and marketing, now heading up the distribution group, network executives are saying that they want these negotiations to stay out of the press.

“We’re really at the beginning stages now of those talks,” said Hopkins, who has years of cable experience (see related story). “If we can get these deals done in the conference room as opposed to on the front page, then, generally speaking, most folks are going to be happier with the outcome.”

The cable industry is considering the Big Ten Network negotiations critically important, since they are likely to set the market for future college conference channels that may be looking to launch. The Big 12 is the next major conference considering launching such a channel. It is currently in an exclusive negotiating period with ESPN, which ends at the end of the month. The SEC, ACC and Pac-10 also are viewed as conferences that could wind up setting up their own channels.
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