SBJ/July 9 - 15, 2007/This Weeks News

Big Ten Net in a fight as launch nears

The three biggest cable operators will not carry the Big Ten Network when it launches on Aug. 30 unless the network agrees to be placed on a sports tier, something the network is unwilling to accept.

A fourth major pay-TV operator says it will not bow to the network’s wishes to be placed on its most widely penetrated tier, suggesting that a deal by the end of August is unlikely.

In the days before last week’s July 4 holiday, senior executives from four of the five biggest pay-TV operators — Comcast, Time Warner Cable, EchoStar and Cox — told SportsBusiness Journal in separate interviews that they will not place the network on their analog tiers at the price the network is seeking. The Big Ten Network is asking cable and satellite operators to pay $1.10 per subscriber within the eight-state Big Ten market; and $0.10 per subscriber in the rest of the United States.

The unanimity is significant since together the four represent more than 55 million national subscribers. In addition, Comcast and Time Warner Cable have a major presence in the Big Ten markets.

Of the top pay-TV providers, only DirecTV, with about 15 million satellite subscribers, has committed to carry the channel at launch. The network also has deals with AT&T and as many as 75 small cable systems in the Big Ten footprint, the largest of which is the Toledo-based Buckeye Cable System, which has about 146,800 customers, making it the nation’s 21st largest cable operator.

“I doubt we will take it, as we see no reason to carry the service in our lowest tier of service nationwide,” said Carl Vogel, vice chairman and president of satellite operator EchoStar.

But Big Ten Network executives suggest that small cable operators know their local markets better than big cable’s corporate decision-makers based on the East Coast.

“It sounds like big cable had a Fourth of July barbecue, we were the primary topic, and we weren’t even invited,” said BTN President Mark Silverman. “We’re confident what we’re asking for is reasonable.”

The battle is a crucial one for cable and satellite operators, who fear that other major college conferences will make the same demands as the Big Ten Conference. The SEC, for example, is considering launching its own channel when its TV contracts are up next year, and conference executives have said they are looking at what transpires with the Big Ten for guidance.

“Creating a separate network just for every sports conference in the country and demanding that all customers nationally pay for it regardless of whether they have any interest in watching it is a strongly anticonsumer position for sports conferences to take,” said Comcast Executive Vice President David Cohen. “It is about more than just the Big Ten.”

And it’s about more than just the college conferences, according to Bob Wilson, Cox’s senior vice president of programming. Cable operators have long complained about the cost of sports networks, which account for half of operators’ programming costs even though sports viewing accounts for 10 percent of ratings, Wilson said.

“Distributors are just trying to make sure this situation doesn’t get worse and become more unfair than it already is,” Wilson said.

Operators have become increasingly emboldened in their carriage disputes with sports networks, starting with YES Network’s battle with Cablevision that kept the Yankees off of New York-area systems for a full season in 2003 and continuing to last year’s NFL Network fight, when Time Warner Cable and Cablevision refused to cut deals. To that end, cable operators expect a bruising public battle in Big Ten markets soon after the channel’s Aug. 30 launch.

“Here’s what will probably happen,” said Melinda Witmer, Time Warner Cable's senior vice president and chief programming officer. “The network will make a huge stink in the marketplace and try to generate a lot of aggravation with the cable companies. We'll try to explain ourselves and they’ll try to explain themselves. And it will cause a lot of hoopla.”

“We’re confident what we’re asking for is
reasonable,” the network’s Mark Silverman said.

In Time Warner Cable’s first extensive comments about its negotiations with the Big Ten Network, Witmer said BTN and NFL Network are niche networks that belong on sports tiers.

“It’s not a never-ending open wallet,” Witmer said. “At some point down the road, your customers are going to pay for this programming. They can’t lose sight of that.”

The problem is that networks want nothing to do with cable’s sports tiers, which generally are among the lowest penetrated — and poorly marketed — tiers that cable offers. Cox, though, is a notable exception. Its sports and information tier has about 30 percent penetration and 2 million national subscribers. It only has a handful of small systems in Big Ten markets, with a Cleveland-area system being the biggest at about 60,000 subscribers.

“Placement of sports programming on dedicated tiers is all about giving consumers the choice they demand, and deserve, so that they do not have to accept and pay for the extremely high cost of sports programming if they don’t watch it and don't want it,” Wilson said.

The way operators see it, sports tiers will be more effective with anchor tenants, like the NFL Network and BTN. They say these carriage deals work best when packaged with the multiple digital TV services they offer. Witmer appealed directly to the Big Ten universities to look further into video-on-demand and the other interactive TV programming that multisystem cable operators provide. For example, she said Time Warner Cable could offer 1,200 hours of video on demand per year, which would allow Big Ten fans to dive deep into less popular sports.

“That’s a better product for the Big Ten universities than a stand-down at the OK Corral over basic carriage,” Witmer said. “We have a VOD platform that consumers can use to support the universities in a way the university community can really benefit from and take full advantage of.”

But BTN officials say that its offering already makes such digital content, including VOD and broadband, available to the operators. BTN executives point to the 75 smaller cable operators who have agreed to carry the channel on expanded basic as evidence that its deal terms are not out of whack.

It also points to MSO-owned channels, such as Comcast-owned Golf Channel, Versus and The mtn., which have a lot of expanded basic carriage on Comcast systems. “If they commit to put their sports networks on a digital tier, then, perhaps, we would listen,” Silverman said.

But Comcast’s Cohen said the carriage deals between the conference channel that it owns — The mtn. — and the Big Ten Network aren’t similar.

“The affiliation agreement between Comcast and The mtn. permits us to select what level of carriage we’re going to carry the network on a market-by-market basis,” he said. “The Big Ten Network doesn’t want to give us any such discretion.”

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