Several months into contract negotiations, the blame game between cable operator
Cox Communications Inc. and sports programmer ESPN continues.
In the past month, ESPN has made strategic ad buys in regional newspapers
and is using its on-air personalities in sports-talk radio spots urging the
station’s viewers to “keep ESPN” from being dropped to a more expensive tier
of cable programming offered by Cox.
The issue became public earlier this fall as Cox began negotiating with the
network for a new agreement to replace a contract due to expire in late March.
After those early negotiations, John Wolfe, vice president of government and
public affairs for Cox, said his company decided to take “some steps to educate
our customers about the economics of cable TV.”
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Cox went to the media, saying that the hike ESPN is requesting for its next
contract would push the per-subscriber fee for ESPN up to $2.61, more than what
the seven next top-rated ad-supported networks – Cartoon Network, Fox News Channel,
Lifetime, Nickelodeon, TBS, TNT and USA – cost combined. Under the contract
in place, Wolfe said for the past five years ESPN had the option of raising
their rate by up to 20 percent each year, which the channel chose to max out
each year, more than doubling the network’s per-subscriber cost since 1999.
“That impacts every single one of our customers, whether they’re sports fans
or not,” said Wolfe, who added that the reason Cox is the lone voice of dissent
among cable operators is simply because their contract is next in line to expire.
And proving that turnabout is only fair play, Rosa Gatti, senior vice president
of communications for ESPN, said while her company “prefers not to negotiate
in the press,” ESPN “felt it had to present its side.”
Now both companies are offering up an endless stream of statistics and argument
points to the public, available either at Cox’s www.makethemplayfair.com, or
ESPN’s own www.keepespn.com. Cox and other cable providers buy stations at a
wholesale rate and then sell them at a retail price, essentially acting as a
middleman between stations and viewers.
“Things have certainly gotten contentious in a hurry,” said Wolfe, who added
Cox is merely attempting to “inject some sanity” into the sports chain’s increases.
The debate has gone to a new level as the companies point to one another’s
business practices as the reason for price raises. Cox says cable sports networks
as a rule cost much more than other channels, mostly due to exorbitant bidding
on the rights to sporting events or professional leagues.
“We shield ESPN from customer concern,” Wolfe said. “That cost is passed on
to two groups of people – ticket buyers and cable television viewers. They think
there are no limits to what amount can be recovered.”
Gatti points to Cox’s high-debt service and the company’s investments in digital
cable and high-speed Internet as having left the cable provider with nowhere
to look but the customer’s bill in recouping expenses. Gatti said ESPN provides
between two and four minutes of local commercial time on its channel every hour
– advertising time that she said Cox often uses to sell its own products to
a demographic that skews more male, even as traditional broadcast networks continue
to lose that audience.
“Revenue is the bottom line,” Gatti said.
Cox has said that the ad cents generated per-subscriber don’t add up to enough,
but Gatti said the value of ESPN often can’t be quantified.
According to an ESPN-sponsored cable operator survey by Beta Research Corp.,
ESPN was rated No. 1 in perceived value for a third year in a row. That ranking
was established by its top rankings for programming that generates local advertising
revenue, its importance to a customer’s acquiring cable and its effectiveness
in cross-selling broadband, high-speed Internet or interactive television.
“I’m hopeful a resolution can be made. We’re not trying to rip ESPN off standard
cable,” said Wolfe, who classified ESPN’s fees as “far and away” from other
cable networks and “getting close” to the levels of HBO and Showtime. “We’re
to preserve its place on standard cable while looking at the economic realities
of today.”
Gatti expressed the same sentiments, although she also said if an agreement
isn’t made to keep ESPN on the standard tier of programming, Rhode Islanders
should look to satellite providers.
“The bottom line is, we are protecting our customers and Cox’s customers,”
Gatti said. “We’re working to a resolution, but there’s no way that bumping
ESPN (to a more expensive tier) is good for the fans.”
