Fox Sports Net Rocky Mountain made a last-ditch effort last week to keep the rights to the Denver Nuggets and Colorado Avalanche, days before the clubs were set to announce the launch of their own regional sports network.
Fox offered last Wednesday to pay the clubs a significantly higher annual rights fee, a substantial step up from what it offered when negotiations broke off in October, a source said.
Kroenke Sports Enterprises had been expected to make an announcement this Tuesday regarding its plan to create its own regional sports network next fall, parting ways with Fox Sports Net Rocky Mountain.
A spokesman for Kroenke Sports Enterprises would not comment on the company's TV plans but confirmed that a major announcement was imminent.
It still could happen, but Fox is now waving money that would put the Avalanche and Nuggets in the upper tier of their respective leagues in terms of annual television revenue. A senior executive from Fox Sports Net's Los Angeles headquarters flew to Denver last week to make the offer in person.
The clubs had been getting rights fees that were about the league averages, roughly $10 million apiece. In talks last October, Fox Sports Net Rocky Mountain did offer to increase the annual fees, but not enough to satisfy Kroenke.
The team owner hired former Fox Sports Net COO Jim Martin as a consultant to explore the possibility of launching a network in-house. Martin, who declined comment, is now expected to be named CEO of the venture if the teams move forward.
Tim Griggs, general manager and vice president of Fox Sports Net Rocky Mountain, said the network is prepared for both possibilities.
"As part of the ongoing renewal discussions, we feel we've made some compelling offers," he said in a statement. "Fox Sports Net would love to be the home of the Avalanche and Nuggets for many years to come. If we aren't able to reach an agreement, we're comfortable with our long-term agreements with the Colorado Rockies, Utah Jazz, University of Denver, Big 12 and Pac-10 football, ACC basketball and, of course, our nightly regional news show."
The network has carried the Nuggets for the last 15 years and the Avalanche since they moved to Denver in 1995. The loss of the teams would strip FSN Rocky Mountain of about two-thirds of its major league sports programming in the Denver market, leaving it with only 50 Colorado Rockies games.
Successful regional sports networks are usually valued at anywhere from $100 million to $400 million, and can go even higher, a fact that's surely not lost on Kroenke or any team owner who's considered launching such a network. But it comes with the downside of not having guaranteed annual revenue flowing to teams, and the risk of not being able to get the sort of lucrative carriage agreements that are the economic foundation of existing cable channels.
The Kroenke group has had only a few talks with Comcast Corp., the major local cable operator, and has no carriage deals in place, a source said.
The plan calls for the network to seek expanded basic cable distribution and a licensing fee of about $1.75 per subscriber per month, less than the $2.40-plus that FSN Rocky Mountain charges now.
There has been no substantive talk of Comcast taking an equity stake in the new Colorado network, as it did in Chicago with a regional sports network set to debut next fall. Sources said Comcast brought up the idea in talks with Kroenke representatives, but that such an arrangement doesn't fit into Kroenke's plan. The Colorado billionaire plans to finance the $20 million to $30 million in start-up costs on his own and does not expect to take on outside investors or partners, a source said.
If Kroenke goes ahead with the network, experts predict that getting carriage deals won't be easy. While Comcast Cable has not been beating the sports tier or a la carte drum like some other cable operators — its president, Stephen Burke, is on record saying he believes regional sports networks belong on expanded basic — price and equity could become major sticking points.
The $1.75 price, combined with whatever FSN Rocky Mountain charged after losing the teams, would probably add up to more than the operators are paying for the one channel now.
If Kroenke won't come down on his price or consider sharing ownership, an all-too-familiar scenario could play out: "You are looking at some sort of carriage battle," said Lee Berke, a consultant to several teams starting their own regional sports networks.
"Those battles played themselves out in New York, Florida [and] Minnesota," he added, a reference to places where regional sports networks have met trouble getting or renewing carriage deals.
