Another reason not to like Cox Cable OR the sports networks

[Snoopy the Celtics Beagle <snoopy@xxxxxxxxxxxxxxxxx>]

The following is from the New York Times (courtesy of Mrs. Celtics 
Beagle).  While it's true that sports fees ARE high, it's ALSO true that 
Cox has always coughed up the money before with no arguement.  They simply 
raised prices directly to the customers.  The difference this time is that 
cable prices are under fire.  No one wants to see ANOTHER price hike for no 
apparent reason.  I don't know why the whole setup isn't done carte blanche 
anyway.  On the other paw, sports networks are now facing the prospect of 
literally paying the price for those hefty broadcast agreements made with 
various sports leagues.  They figured they could make their money back 
easily just by using subscribers as a carrot AND a stick.

"You thought I didn't have a temper--Ha, ha, ha...Surprise!"--Christine 
Lavin, "Regretting What I said..."


Sports Fan Is the Prize, or the Victim, in Cable Fight
October 6, 2003
By DAVID D. KIRKPATRICK and GERALDINE FABRIKANT

Miami and West Virginia were tied 10-10 in the third quarter of their 
college football game Thursday night, and many eyes in the crowd at the 
Draft House Sports Cafe in Phoenix were trained on a big television set 
tuned to ESPN, the only channel showing the game.  Most were blissfully 
unaware of a business dispute that is threatening to keep many televised 
sports events from fans in Phoenix, as well as in San Diego, New Orleans, 
Cleveland and other cities served by Cox Cable, the fourth-largest
cable company in the country.

Cox is heading for a showdown with both ESPN and its programming rival, the 
Fox Sports regional networks. For years, ESPN and Fox Sports have 
infuriated cable operators by negotiating stiff increases in the fees paid 
to carry their networks. Last week, James O. Robbins, chief
executive of Cox, stunned a Goldman Sachs investors conference by declaring 
publicly that his company would not meet the latest demands made during 
talks to renew its contracts to carry several ESPN channels and the Fox 
Sports networks.

Many analysts interpreted his comments as a threat to drop the channels 
from Cox's service - which reaches 6.3 million homes - for some period of 
time if the two sides cannot come to terms.

It is an alarming prospect for hard-core fans like Kelli Wilson, manager of 
the Draft House, which relies on Cox Cable's sports programming. "That 
would stink," she said, in a telephone interview midway through the 
Miami-West Virginia game. "It would cause a lot of problems for a lot
of people, and it would be devastating to anyone in the sports industry."

But Mr. Robbins's attacks on ESPN and Fox Sports are only one skirmish in a 
battle playing out in the television business. Cable systems are clashing 
with sports programmers around the country, whether it is the fight between 
Cablevision and the YES Network that kept New York Yankees games off the 
air in much of the metropolitan area last year or feuds this spring between 
Fox Sports and Time Warner Cable in Minnesota and Orlando.

With few new customers signing up for their basic service, cable companies 
- and especially the new industry giant Comcast - are pushing to hold down 
the fees they pay for programming, and the sports channels are by far the 
most expensive on cable.

Yet the parent company of Fox Sports, the News Corporation, and ESPN's 
parent, the Walt Disney Company, each count on the sports networks as a 
pivotal source of financial growth. Derek Baine, a sports programming 
analyst at Kagan World Media, a consulting company, estimated that ESPN
accounted for 15.5 percent of Disney's $3.75 billion cash flow last year.

And both companies carry weighty cudgels to the bargaining table, including 
the singular and irreplaceable appeal of the sports events they control, 
Disney's ability to withhold cable transmission of its ABC television 
stations in certain markets, and News Corporation's pending acquisition of 
control of the satellite service DirecTV.  If disgruntled sports fans 
defect from Cox, they might subscribe to DirecTV instead - a silver lining 
for the News Corporation. Still, Cox executives and other cable operators 
say they are emboldened by the example of Cablevision, which said it lost 
only 50,000 of its 3 million subscribers in the year it did not broadcast 
the Yankees.

Cable customers, meanwhile, complain that their monthly fees are soaring. 
Basic cable charges have risen 7 percent a year for the last five years, 
three times the rate of inflation, driven in part by the cost of sports 
programming. In reaction, Senator John McCain, the Republican from Arizona, 
recently denounced the cable industry's "apparent willingness and ability 
to gouge the American consumer."

Analysts said Mr. Robbins's unusual display of belligerence at the clubby 
Wall Street conference appeared to be intended to open a public relations 
battle by focusing on the fee increases for sports programming should a 
deadlock keep the channels off the air. Negotiations between cable 
companies and programmers are usually confidential, but Mr. Robbins told 
the analysts at the conference that ESPN wanted a 20 percent annual 
increase in its fees from Cox, while Fox Sports proposed a 35 percent 
increase next year. Cox, he said, pays ESPN $2.61 a month for each 
subscriber, more than the cost of the seven top-rated ad-supported networks 
combined. He said ESPN accounted for 4 percent of its customers viewing, 
but 18 percent of its programming costs. In Phoenix, where Fox Sports 
operates a regional sports channel, Fox Sports and ESPN together make up 8 
percent of viewing and 32 percent of programming costs, he said.

Mr. Robbins said the solution was to allow cable operators to tier sports 
networks - offering the channels as an extra package at an additional cost 
to basic cable, just as Cablevision offers the YES Network and other 
regional sports channels as a premium package in New York.  "We simply are 
not going to be able to swallow that percentage increase," he said. "We 
don't know where this train is going to end up."

But removing Fox Sports and ESPN from basic cable packages would reduce the 
channels' audiences and cut advertising revenue.

Speaking at the same Goldman Sachs conference a few hours later, Peter 
Chernin, president and chief operating officer of the News Corporation, 
flatly contradicted Mr. Robbins.  "That 35 percent is just not true," Mr. 
Chernin said, adding that the idea of tiering was "a nonstarter."

Speaking in the afternoon, Robert A. Iger, president and chief operating 
officer of Disney, called Mr. Robbins's comments "comic relief," adding 
that the emphasis on ESPN's cost belied its value to cable operators in 
attracting subscribers and selling local advertising.

After the conference, a News Corporation executive described the 35 percent 
fee increase as merely a starting bid in haggling over a new contract to 
pick up when the current agreement expires at the end of the year. But if 
Cox did take the Fox Sports networks off the air, the executive warned, Cox 
would end up losing subscribers to DirecTV - a preview of how gaining a 
major interest in DirecTV could strengthen Fox's hand with cable operators. 
ESPN's contracts with Cox are set to expire at the end of
the first quarter of 2004. Asked in a telephone interview Friday, Sean 
Bratches, ESPN's executive vice president for affiliate sales and 
marketing, said Mr. Robbins's figures about ESPN's ratings or viewership 
understated its importance to die-hard sports fans, a mostly male audience 
that is valuable to advertisers because it is hard to reach. ESPN is often 
the reason they subscribe to cable, he asserted, and he pointed to a survey 
of cable operators suggesting that the network was more valuable than other 
networks.

"Our value is being positioned publicly in a very myopic and self-serving 
way," Mr. Bratches said. He said there was a "distinct possibility" that 
ESPN could be dropped by Cox Cable for a time. "We think it would be a 
great disservice to Cox subscribers," he added, "and we are very confident 
that our fans would find access to our service through other means."

He acknowledged that those other means entailed switching to a satellite 
service. If ESPN went off Cox Cable, he added later through a spokeswoman, 
"it would hurt Cox more than ESPN, because ESPN is a bigger part of Cox's 
business than Cox is of ESPN's. And satellite would be the big winner."

One thing is for sure: sports fans will look for someone to blame.

"It would be terrible" to be without the sports networks, Eric Dahrling, 
manager of Yogi's Sports Bar in San Diego, said Thursday night, watching 
Miami beat West Virginia 22-20 with a 23-yard field goal with 11 seconds to 
play.

Snoopy the Celtics Beagle
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