Cable Operators Balking at NFL Network
By SETH SUTEL, AP Business Writer
Tuesday, November 21, 2006 04 27 PM
(11-21) 16:27 PST New York (AP) --
On Thanksgiving, the NFL will air the first of eight live pro football games on its own network. But it won't be available to many viewers across the country because the league hasn't reached carriage agreements with several major cable operators.
The eight games — beginning with Thursday's matchup of the Denver Broncos and the Kansas City Chiefs — will be available on local broadcasters, satellite TV and a number of other cable systems that do carry the NFL Network. But that totals only about 40 million of the nation's 111.4 million households with TVs.
Most notable among the cable companies that haven't reached deals with the National Football League are No. 2 operator Time Warner Cable, which is a unit of the media conglomerate Time Warner Inc.; Cablevision Systems Corp., a New York-area provider; and Charter Communications Inc. Time Warner, for its part, says it's highly unlikely a deal will be reached in time for the first game.
Comcast Corp., the largest cable company in the country, has carried the network for two years, but as part of a digital package ordered by only about 7 million out of its 24 million subscribers. Time Warner says it's balking at a demand from NFL that the network be carried on the most widely available basic service lineup.
The issue is cost. Spokesman Mark Harrad says Time Warner would have to pay $140 million a year to provide the channel to all 13.5 million of its subscribers in 33 states, placing it in the top five most expensive cable networks. He said the company would prefer to carry the network as part of a premium service — not at the rate of 70 cents per customer per month the network is reportedly seeking.
"If we put all expensive sports programming on the standard tier of service, that would increase our rates to all of our customers, even those who didn't particularly care about football or these games," said Harrad.
NFL Network spokesman Seth Palansky counters that a number of other cable companies as well as the two main satellite providers are "happily" carrying the network, which is jointly owned by the league's 32 team owners.
"It's the most valuable programming a cable company can offer, and a cable company not carrying live NFL games is like a grocery store not carrying milk," Palansky said.
The NFL already makes a bundle from broadcasting agreements, money that is shared equally by all team owners. General Electric Co.'s NBC started broadcasting Sunday night games this year under a six-year, $600 million per year deal with the league, while Walt Disney Co.'s ESPN is paying $1.1 billion per year for Monday night football over eight years. Last year the NFL reached six-year, $8 billion extensions with Fox and CBS for Sunday afternoon games.
NFL team owners are betting their own network will offer other opportunities for building revenue in the future, including streaming programming over the Internet, through Apple Computer Inc.'s iTunes and cell phones, Palansky said.
Palansky declined to release financial data for the network, including its revenues and losses to date, but the NFL said at the time of its launch three years ago that it expected to have $100 million in startup costs.
About two-thirds of the NFL network's 40 million households come from satellite TV subscribers who get either the Dish network from EchoStar Communications Corp. or DirecTV from The DirecTV Group Inc. By contrast, Disney's ESPN network is available in 92 million homes.
Until now, however, the network hasn't carried any NFL games live. Instead, it ran other football-related programming like news, interviews, game highlights and replays, plus games from NFL Europe.
The NFL is hoping that the appeal of the live games, which are scheduled for Thursdays and Saturdays, will help expand the network's audience. Bryant Gumbel and Cris Collinsworth will be the game announcers.
John Mansell, senior analyst at Kagan Research, a media research and analysis firm, says the dispute between the NFL and the cable companies is about "positioning, and money."
"Cable operators love the NFL, but they want to carry it on a digital tier, where they can use it as a destination for sports programming," Mansell said. "If it's going to be expensive, they want to receive compensation for it" from customers who pay premium fees.
The cable companies are in a tough spot on this dispute. If hard-core fans can't see the games they want, the complaints could start pouring in — something Time Warner says hasn't happened yet. On the other hand, no one's going to like it if the cable companies pass along the costs by raising rates.
Comcast, meanwhile, is being sued by the NFL Network after trying to switch over newly acquired cable systems to the arrangement already in place for existing subscribers.
Comcast executive vice president David Cohen said in a statement that the NFL is trying to "force cable companies to charge many consumers for programming they don't want. Sports programming fees are out of control in general and the NFL programming is very expensive."
Harrad of Time Warner says that cable companies may have already lost the most die-hard NFL fans years ago anyway when the NFL created a major package of games called NFL Sunday Ticket and sold it exclusively to DirecTV, which is controlled by Rupert Murdoch's News Corp.
The full package costs $249 per year for access to up to 14 out-of-market regular season games every Sunday. In November of 2004, DirecTV announced a five-year, $3.5 billion agreement with the NFL to extend and expand their exclusive rights to carry NFL Sunday Ticket through the 2010 season.
In the end, it remains to be seen whether either side will blink. Time Warner says it doesn't expect a resolution prior to the first game. Meantime, the NFL Network's Web site is encouraging fans to request their cable operators carry the network.
Sports programmers and cable operators have clashed before, industry analysts note, as the costs for carrying sports continues to climb. Mansell notes that compromises are usually reached, however, and if there is a dispute, it's unusual for it to last beyond one year.
In the meantime, says Howard Horowitz of Horowitz Associates Inc., a market research and consulting firm: "the consumer will usually be asked by each side to blame the other side."
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