To keep a lid on cable rates, Congress should approve legislation that would let cable operators offer sports networks on an untiered, a la carte basis.
That was the surprise pitch fired by Jerry Kent, Charter Communications president and CEO, at a news conference in Washington last week to promote the National Cable & Telecommunications Association’s upcoming convention.
“You can’t just continue to have these kinds of rate increases [that cable operators have been receiving from the sports networks] day in and day out and maintain reasonable rates for our subscribers,” said Mr. Kent, who is also chairman of the NCTA’s convention committee.
According to Mr. Kent, more than half of Charter’s double-digit annual programming cost increases are attributable to sports networks. That’s putting a major crunch on the returns that Charter is getting from basic cable services, Mr. Kent said, because the company has been trying to cap rate increases for subscribers at anywhere from 4 percent to 6 percent annually.
“Programming cost increases is one of the top things I worry about,” he said.
Under Mr. Kent’s legislative proposal, sports networks that don’t agree to a la carte carriage would lose the antitrust exemptions they currently get from the federal government to organize themselves and negotiate media packages.
According to Mr. Kent’s analysis, only about 25 percent of a cable system’s subscribers are regular viewers of a network such as ESPN. But, he said, when ESPN insists on carriage on a system’s basic tier, all the system’s subscribers are forced to subsidize the sports fans.
“For the vast majority of consumers, it [a la carte carriage] would be a vast benefit,” Mr. Kent said.
But the sports networks have made clear they’ll fight any effort to knock them off basic-to protect their per-subscriber fees and the base for their advertising sales.
“ESPN’s business model has been based on broad distribution,” said M.C. Antil, a spokesman for ESPN, which jacked up its rates 20 percent this year, reportedly to about $1.50 per subscriber per month. “It has been proven that the vast majority of Americans both want and will watch sports.”
ESPN also claims that even with its rate increases, ESPN local avails account for an average of 80 cents per subscriber per month in advertising sales for cable operators, bringing the net effective rate for ESPN to about 70 cents per subscriber.
In addition, the network contends that one of every five dollars in local advertising revenues for cable is generated by ESPN.
Despite escalating concerns of operators about the price of sports programming, the NCTA has stayed out of the fight, at least thus far, in part because the operators and sports networks are NCTA members.