SBJ/20100823/Media

Despite successes, launching a sports channel is no slam dunk

Every time I ask a veteran media executive about the long list of sports properties that want to launch their own channel, I get the same answer:

“It’s not easy.”

But some of these properties looking to launch channels are acting like it is easy. They believe that the most recent sports channels to launch — including NFL Network, MLB Network and the Big Ten Network — already have fought the important battles and have set the strategies that will make their paths easier.

The roster of potential channels seems endless, from teams (like the Houston Astros) to conferences (Pac-10) to individual schools (University of Texas). Each believes it has figured out the right strategy to get cable carriage.

Most will fail.

Distributors don’t want to launch these channels. They are happy enough with the national and regional sports networks that already carry the programming. The idea that cable and satellite operators are powerless to keep these channels from launching is laughable. In fact, history shows how a distributor can stop a new channel before it even starts.

In 2007, Comcast supported Fox Sports’ move to pick up rights to Pistons games in Detroit, in an effort to keep a competitor from coming in,obtaining the rights and launching a new regional sports network in the market. More sports channels equal more payouts by distributors, so they have a financial interest in keeping new sports channels from launching.

NOTHING COMES EASY
FOR SPORTS CHANNELS
The Big Ten Network, which college properties look to as an example, launched without deals from the top eight cable operators.
NFL Network carries the name of the most powerful U.S. sports league, but it lacks deals with three of the top five cable outlets.
MLB Network launched in 50 million homes in January 2009. Twenty months later, it has added only 5 million more.

Carriage fights between sports networks and cable operators consistently have been the hardest-fought negotiations that I have covered in the two decades I have reported on the business.

Last week, I called Big Ten Network President Mark Silverman, who was in the middle of one of those fights, to see what advice he had for properties that wanted to launch their own TV channel. Universities and conferences point to the Big Ten Network as a success and say its strategy is one that can be replicated elsewhere.

“It’s not easy,” Silverman said.

The Big Ten Network launched as a joint venture between the Big Ten and Fox in August 2007. It launched without a carriage deal from any of the top eight cable operators. In fact, the network went through its first year without securing deals with the country’s two biggest cable operators, Comcast and Time Warner Cable.

What resulted was the most public negotiation Silverman had ever experienced. Barbs were traded that sometimes became personal.

“There were so many outside factors in this, from politicians to media to alumni,” Silverman said. “I used to come to work during football season, and my voice mail would be filled with messages from angry fans.”

In that first year, the network was losing money and taking a PR hit. Ultimately, Big Ten Commissioner Jim Delany kept the conference’s schools from getting cold feet, and Fox used its leverage from other networks, like its regional sports networks, to fashion deals with Comcast and Time Warner Cable.

“Our channel was successful for three reasons,” Silverman said. “The Big Ten has a large, loyal fan base. It has a great commissioner who was effective in leading the conference. And it has a great partner in Fox.”

Silverman argues that the Big Ten needed all three to be successful. The struggles that some other recently launched sports channels have gone through suggest that he’s right.

Take the NFL, for example. The NFL has a large, loyal fan base. Its games are more popular than any other sport, by far. In a recent Turnkey Sports Poll of 1,100 sports industry executives, most viewed NFL Network as the most successful specialized channel (SportsBusiness Journal, Aug. 16-22 issue). But the league’s NFL Network still hasn’t been able to cut a deal with three of the top five cable operators (Time Warner, Cablevision and Charter) and is in just 56.5 million homes. No deal seems to be on the horizon this year, meaning that this will be the fifth season that these cable operators — representing more than 20 million subscribers — will go without NFL Network’s live game programming.

If distributors can say no to NFL programming, what makes the Pac-10, the University of Texas, or others think they will be able to convince these same companies to carry their channels? I find it hard to believe that second-tier games and coaches’ shows will be enough to convince distributors to open their wallets.

Some media executives argue that the NFL’s insistence on pursuing a channel on its own, without seeking a partner, has hurt its distribution. But having media partners doesn’t always translate to success, either. In Portland, the NBA Trail Blazers’ channel with Comcast still doesn’t have carriage on DirecTV or any of the smaller non-Comcast cable channels, frustrating both the team and its fans. Plus, Comcast’s Mountain West Conference channel, The mtn., had troubles getting carriage for years after its launch.

Even MLB Network must be feeling some frustrations with its distributor partners. The channel was the most successful startup network in cable history, launching in January 2009 to 50 million subscribers. Now, 20 months later, it’s in 55 million homes, according to Nielsen, meaning that it’s gained 5 million homes in just short of two years — hardly the kind of growth a channel owned by several distributors would expect.

When asked the same question — What do properties need to have a successful channel? — Turner’s David Levy came up with a list similar to Silverman’s, but he added one more wrinkle: The business plan has to work for everyone.

“When you have big markets and big brands and big teams, if the business model is right and you form a relationship with the operator, whether it be satellite, telco or cable, you have the opportunity to make some serious money,” he said. “But that’s if the model works.”

I expect to see several carriage battles as properties try to launch their networks. Cable and satellite operators are prepared to fight to keep their programming costs down. It will be interesting to see which properties have the resolve to see the battle through the end.

John Ourand can be reached at jourand@sportsbusinessjournal.com. Follow him on Twitter @Ourand_SBJ.

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