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NFL Net Cries Foul at MSOs

Nov 13, 2006  •  Post A Comment

By Allison J. Waldman

Special to TelevisionWeek

A battle is taking place in cable television between two entertainment powerhouses: the NFL Network and operators led by Time Warner Cable that refuse to add the 3-year-old sports channel to their basic packages.

The dispute is depriving millions of football fans of access to the NFL’s 24-hour network, which this year has exclusive broadcast rights to eight prime-time games.

“The NFL Network has not budged from their original demand, which is that we put the channel on our standard tier of service at a figure that would amount to about $140 million from us,” said Mark Harrad, senior VP of corporate communications for Time Warner. “We believe strongly that the NFL Network belongs on a sports tier, where the customers that are true fans and want to see those particular eight games have a chance to get it and pay a fee for it, rather than have all of our customers pay a higher fee by virtue of putting it on a standard tier where there isn’t a high demand for all they offer.”

“I think it’s more of a philosophical difference than financial, and I say that based on the fact that we do have 140 cable companies who’ve agreed to carry us,” said NFL Network spokesman Seth Palansky. “Comcast, the country’s largest; Cox Cable; Adelphia … it’s not like they haven’t agreed. They all agreed on terms, including DirecTV and Dish and Verizon and ATT, etc. They carry us broadly and don’t relegate us to a failed experiment known as a sports tier. Less than 1 percent of consumers in this country who have a chance to get a sports tier actually subscribe to it. It does not work.”

The NFL Network offers more than the eight exclusive games. “We charge cable operators the equivalent of a movie ticket for a year. For that, we give them NFL Network for the year, our high-definition feed, all our video-on-demand content, which is the No. 1-rated sports content on-demand,” Mr. Palansky said. “It includes game highlights of every game, 15-minute versions delivered midnight on Sunday to all our cable affiliates. And we give them several minutes of commercial time every hour on our air, every day, 365 days a year, including our most highly rated shows on those nights. They can sell the ad inventory, keep the revenue from that to offset the movie ticket cost we offer. Now, if this wasn’t a fair value proposition, we don’t think we’d have 140 cable companies signed up and delivering it.”

Time Warner is not convinced. “Our point is that 100 percent of our customers don’t watch the NFL,” Mr. Harrad said. “In fact, about 20 percent at the most are really sports fans, so since sports programming is so out of proportionally more costly than other kinds of programming, why not put sports programming on a tier where only sports fans will have to pay?”

NFL game ratings are 61 percent higher than those for the average prime-time show, according to NFL Network.

“We take offense to it that the cable community is doing this,” Mr. Palansky said. “The popularity of our programming should not be called into question here. Our opening game, just a regular-season game, outrated every single NBA Finals game from the past 15 NBA championships.”

Still, some cable companies are committed to the sports tier. “We think the elegant solution is the sports tier,” Time Warner’s Mr. Harrad said. “The people who want the NFL Network can have it; it is more expensive, but it’s packaged in a tier with the NBA channel and college sports programming. For the people who don’t want it, they don’t have to see it on the bottom line of their standard tier cable bill.”

Mr. Palansky and the NFL Network don’t want fans to think that they are being bilked. “The cable operators want to charge $10 extra a month on a sports tier and let the consumer pay 12 times the amount they’re paying for the NFL Network,” he said. “Unfortunately, those consumers-our fans-will believe that it’s the NFL passing along those costs, and the truth is a movie ticket a year. If you ask any consumer if a movie ticket is good value for all that we’re offering, I would guarantee that 98 percent would agree it is.”

Mr. Harrad acknowledges the appeal of the channel. “We would like to be able to carry the NFL Network,” he said. “I hope that’s apparent. We have nothing derogatory to say about the content that they have on now or what they may have in the future. Our point is that we cannot afford to pay extraordinary prices for sports networks. Those prices will go to the bottom line of all of our customers.”

In an interesting turn, Time Warner recently added a new sports channel to its basic programming in New York. “Their argument is that costly sports networks should go on a sports tier,” Mr. Palansky said, “but it’s funny that when Time Warner launched SportsNet New York in the New York market-their Mets games-it got on expanded cable and went to everyone. They didn’t raise their customers’ rates.”

DirecTV Deal Questioned

At the same time, Mr. Harrad questioned why, if the NFL cares about serving all of its fans, it has an exclusive deal with DirecTV Sunday Ticket subs. “If the goal of the NFL was to get all of their fans access to all of their games, then why have they been selling the Sunday Ticket exclusively to DirecTV since 1994?” he asked. “There are 238 out-of-market games that you can’t get no matter where you live or what cable system you have unless you buy DirecTV. It’s a little hypocritical.”

The NFL Network will televise the first of its eight exclusive games Nov. 23. At that point, the voice of football fans who don’t have the network is likely to be added to the debate.

“We’re dealing with the world’s largest media company and they’re pretty much running monopolies in a lot of cases,” Mr. Palansky said. “The cable companies are doing exactly what they want. In no way is this a fair system, and it’s because Time Warner has so much power in the cable world. We’ll see who blinks first. Still, I think at the end of the day they’ll be stuck carrying it, and in truth, the terms are going to get worse for the cable operator, not better, as time goes by.”

“I hope the issue between NFL Network and Time Warner gets resolved soon, but the broader issue of sports programming and the cost they charge cable for licensing fees-there’s something about that economic model that seems to be broken,” Mr. Harrad said.

While both the NFL Network and Time Warner are resolute in their positions, some observers believe a negotiated settlement is not far off. Rick Gentile, a former executive producer for CBS Sports who is now a professor at Seton Hall University, is one such observer. “In all the negotiations in the past between cable systems and networks, whether new networks or growing networks, it always comes down to the network wanting to receive more from the cable system and the cable system wanting to put them on a digital tier,” he said.

In New York, for instance, Cablevision battled with the New York Yankees’ YES Network for months before a deal was struck. “The bottom line is that there will be a negotiation,” Mr. Gentile said. “It might take some time, but they will come to a number because (a) the NFL Network needs to be on Time Warner and (b) Time Warner needs to have the NFL Network on its systems. There will be a deal made.

“I think it’ll happen by Thanksgiving because that first NFL Network game is that night,” he said. “If it doesn’t happen by Thanksgiving, it’ll happen between the first game on Thanksgiving night and their next game.”