Cable Operators

Gardner: Fox Cable Curbing Sports Costs

8/03/2004 9:28 AM Eastern

Orlando, Fla. -- Rupert Murdoch’s Fox Cable Networks Group has gotten “the message” from operators that sports costs -- and license fees -- can’t continue to soar unabated, the unit’s affiliate-sales chief said Tuesday.

Lindsay Gardner, Fox Cable’s executive vice president of affiliate sales and marketing, told members of the National Cable Television Cooperative that “as a matter of survival,” his division and parent News Corp. are refusing to fork over huge increases for sports rights.

“Over the past few years, you and your colleagues -- your colleagues at bigger companies -- have pushed back on us hard,” Gardner said during a programmers’ roundtable at the NCTC’s annual meeting here.

“We understand that the increases we’ve been able to secure from you over the years just won’t work in the future,” he added. “The days are gone when we will pay a team what a team asks us.”

Sports costs and distributor-programmer relations were among the key issues addressed at the roundtable, with participants also including Ben Pyne, executive VP of Disney and ESPN Networks affiliate sales and marketing; Kim Martin, executive VP of distribution and affiliate marketing for AMC and WE: Women’s Entertainment; and Rob Kennedy, executive VP and co-chief operating officer for C-SPAN.

During the panel, Gardner alluded to the recent state of relations between programmers and operators, particularly regarding skyrocketing sports costs.

“I think we’re coming out of a period of quite a bit of conflict for us,” Gardner said. “We get the message.”

Fox Cable, which owns a host of regional sports networks, has retooled its business and invested in technology that makes it “more efficient” to produce games, according to Gardner.

“And we’ve had very, very difficult conversations and negotiations with teams,” he added.

The evidence of that, according to Gardner, is that Fox has lost a number of teams, “and we’ve gotten many of them back, and we’ve gotten new teams.”

Whenever you read that Major League Baseball’s Minnesota Twins or the National Basketball Association’s Houston Rockets are looking to start their own cable network, Gardner said, “that’s usually a last resort after they’ve failed to secure double, multihigh double-digit increases -- in some cases, triple-digit increases -- from us.”

Added Gardner, “We’ve done this, and are doing this, as a matter or survival, because we know, we understand that your businesses won’t support the kind of growth and expenses that they have been able to support over the past 10 years.”

During a question-and-answer session, Pyne faced a follow-up inquiry regarding an issue that was raised during Monday’s American Cable Association meeting.

Pyne recently testified in Washington, D.C., that The Walt Disney Co. is seeking monthly license fees of 75 cents per subscriber for its ABC TV stations if a cable operator doesn’t carry the media giant’s affiliated cable services.

Some operators have said that if a TV station -- a network-owned station or an affiliate -- seeks cash for retransmission consent, they are going outside of their markets to carry distant signals from stations that aren’t seeking such cash payments.

Pyne was asked if Disney would block its affiliates from providing distant signals to cable operators that don’t want to pay the ABC owned-and-operated stations in their own markets for retransmission consent

After the session, a Disney ESPN spokeswoman issued a statement on the company’s position on the issue.

“Carrying an out-of-market station instead of the local ABC station is a disservice to consumers who would be deprived of valuable local news and public-interest programming,” she said.

“In all but a handful of circumstances, the network programming on the distant station would be blacked out pursuant to the nonduplication rights of the local affiliate,” she added.

The spokeswoman charged, “The ACA simply refuses to recognize the substantial investment the local ABC stations make in their programming and the value the operators receive in selling it to their subscribers.”

During the session, Martin said she is in the middle of negotiating a carriage deal with the NCTC for both Mag Rack and Sportskool.

Along those lines, Gardner was asked if Fox Cable planned to do a master carriage agreement with the group for its regional sports services. Gardner said he’s spent a lot of time with the NCTC over such a potential agreement.

“It’s hard to do one national deal,” Gardner said. “We may get there. Part of the challenge is that there are limits to the extent that you can act like an MSO.”

That’s because the NCTC typically hasn’t been able to guarantee a programmer like Fox Cable a specific number of subscribers as part of an affiliation contract, the way that a single MSO can.

NCTC member Bill Bresnan, CEO of Bresnan Communications, was Tuesday’s luncheon keynote speaker.

Bresnan -- who has systems in Wyoming, Utah, Montana and Colorado with more than 300,000 subscribers -- was bullish on the prospects for small-system operators. “We can be small but mighty,” he said.

November