Cable Operators

Garden Stays Dark on TWC

1/09/2012 12:01 AM Eastern

With the first week of 2012 drawing to a
close, regional sports networks MSG and MSG Plus remained
dark on Time Warner Cable systems.

The RSNs have been off of Time Warner Cable’s systems
in the New York DMA and upstate New York since
Jan. 1, when their contract ended after the parties could
not bridge their license fee differences.

Some 2.3 million TWC subscribers have been unable
to view New York Knicks National Basketball Association
games, and those of the National Hockey League’s New
York Rangers and Islanders, New Jersey Devils and Buffalo
Sabres, since the programmer pulled its signals.

“We’re still waiting for them to come back to the table,”
a Time Warner Cable spokesman said, noting that the parties
hadn’t spoken since Dec. 27.

“If we thought there would be a fair and reasonable conversation,
we’d be up there in an hour,” Madison Square
Garden Media president Mike Bair responded.

TALKING SINCE ’09

Bair said that since the end of 2009, MSG Media had “sent
over multiple proposals, various alternative and different approaches
to consummate a deal, all of which were rejected.”

Time Warner Cable maintains the parties were close to
a deal in early December, calling for a 6.5% monthly subscriber
fee increase for the networks, plus fees for national
music service Fuse, before MSG Media upped the ante,
seeking a 53% hike.

“This is not a low-priced RSN seeking a big increase,”
Time Warner Cable chief video and content officer
Melinda Witmer told Multichannel News. “It’s a top-ofthe-
market player, looking for an increase that would
set a very high bar with serious ripple effects across the
industry.”

MSG maintains it wants Time Warner Cable to value its
networks the same as other providers do in the marketplace.

Bair called the 53% figure a “gross distortion of the facts”
and “not grounded in reality.”

Time Warner Cable has not disclosed how much it paid
for MSG and MSG Plus. SNL Kagan estimates the channels
draw monthly subscriber license fees of $2.48 and $2.17,
respectively.

Time Warner Cable’s last contract with MSG, struck in
2005, followed the RSNs being off of TWC’s air for a couple
of months and was assisted by mediation by Elliot Abrams,
then New York state attorney general.

The parties publicly fell out in mid-December, when
the nation’s No. 2 MSO dropped “lightly viewed” music
network Fuse from 8 million homes.

Bair said dropping Fuse is not the main issue, though.
“It’s ultimately about sports, the value of the teams, brands
and the regional in New York,” he said.

MSG points out that Time Warner Cable has done its
part to lift the price of sports programming by spending
billions of dollars to make the NBA’s Los Angeles Lakers
the cornerstone of a pair of RSNs that will launch in
southern California next year. The cable company also
is expressing interest in purchasing MLB’s Los Angeles
Dodgers as a means to control and hold the club’s media
rights, currently held by Fox Sports-owned Prime Ticket.

Sources had indicated that MSG Media might have interest
in owning the Dodgers. Bair declined to comment.

Bair said MSG will continue with social media, traditional
media ads and viewing parties to get its messaging
about Time Warner Cable not valuing the RSNs the same
way other area providers do and encouraging them to switch
distributors. MSG will also continue to host viewing parties.

“When you get out into the marketplace, you can see how
fans feel about the New York Knicks, Rangers and Islanders,
the New Jersey Devils and Buffalo Sabres,” Bair said.
“We were up in Buffalo, and the fans were so into it,
they treated the game like it was the Super Bowl.”

Time Warner Cable moved NBA TV into the former
MSG slot on Jan. 1 and shifted NHL Network into
MSG Plus’ channel location the following day. The cable
company is making its $5.95-per-month Sports Pass tier
available for free in January to ease fans’ pain.

“If this continues, we’ll think about other options,”
the TWC spokesman said about whether it
would be offering a rebate, something New York
City comptroller John Liu has urged.

None of the New York RSNs have carriage contracts
with Dish Network, but Bair said MSG is secure
with the other providers in the area, a roster
that includes Comcast, Verizon Communications’
FiOS TV, RCN and Cablevision.

With a total of 2.3 million subscribers in the New
York DMA and upstate New York, including 330,000
in the Buffalo area, Time Warner Cable points out it is
MSG’s “largest non-affiliated” distributor.

Cablevision, with 3 million homes in the New York
DMA, spun off MSG Media as a separate, publicly held
company in February 2010.

TWC HAS UPPER HAND: EAGAN

In a report, Collins Stewart media analyst Tom Eagan said
the cable operator might hold the stronger hand because of
the lack of complete video distribution substitution, as FiOS
TV only covers about 40% of Time Warner Cable’s footprint in
the aforementioned areas. As such, he thinks the MSO may
be willing to forfeit subscribers to improve margin, a luxury
MSG can’t necessarily bear as readily.

“While we don’t know the exact rate TWC pays, TWC has
stated its refusal to pay a 50%-plus affiliate increase, which
would translate into a monthly increase of more than $2,”
Eagan wrote. “A loss of 60,000 subs translates to 6.2% of
the TWC subs (in NYC and upstate NY) that we estimate
to have FiOS. But it amounts to just 0.5% of its entire sub
base. Conversely, should MSG lose the TWC affiliate revenue,
it would severely impact MSG operating cash flow.”

Bair said TWC would also feel the loss, as MSG’s ratings
for the Knicks and Rangers are up significantly.

October
November