News

Cox, ESPN are Still Dueling

11/02/2003 7:00 PM Eastern

Cox Communications Inc. and ESPN continued to spar last week, with Cox again saying it would drop the sports programmer if the two parties can't agree to contract terms.

And ESPN retaliated against earlier Cox moves by blocking the MSO from Web-based affiliate support.

The head-butting began last month, when Cox CEO Jim Robbins told analysts at an industry conference that he would not tolerate further 20% annual license-fee increase after ESPN's affiliate agreement expires.

ESPN fired back by staging a press conference to rebut Cox's claims and contend that ESPN's net costs are minimal given the channel's ad-sales and other benefits.

Robbins, in an interview, said ESPN's latest counter-move didn't help matters.

"It strikes me that we listened to the [ESPN] press conference and there was all sorts of verbiage about good conversations and hopefully we could get to a solution and the next day they pull the plug on the affiliate support Web site, which allows us to work with ESPN to get the right ads on the right place," Robbins said in an interview. "I didn't consider what they did to be a constructive move. Anybody in his right mind would have to look at that and suggest that it wasn't conducive to getting the train back on track."

ESPN spokeswoman Rosa Gatti said ESPN still provides show schedules and other marketing materials to Cox via fax, but it has pulled non-contractual marketing support, including the affiliate site and sending on-air talent to local Cox events.

"It's important to remember that Cox had launched a Web site that only tells one side of the story," Gatti said. "Cox chose to publicly debate our negotiations and launched a campaign which denigrates our brand."

That Cox Web site (http://www.makethemplayfair.com) contains information on the programming debate, including news stories and press releases. It also urged cable subscribers to contact ESPN, Fox Sports and elected officials to complain about the high prices. Cox even provided a sample letter that consumers could sign and send via e-mail.

"Why should we sustain efforts that takes people's time and financial resources when Cox doesn't appreciate the value?" Gatti asked, adding that ESPN still hopes to negotiate a deal with Cox.

Cox's ESPN contract expires in the first quarter of 2004, making Cox the first big MSO to come up for negotiation.

Robbins keeps holding out the possibility that ESPN would be dropped.

"If we can't get to reasonable terms, it comes down to the fact that they will not let us carry their programming," Robbins told analysts last week during a conference call on Cox's third-quarter results. "If we have to go that direction, we'll go that direction.

Robbins also said Cox was having "good negotiations" with "one vendor," but declined to name names.

Robbins still wouldn't divulge that programmer's name in a separate interview, but it appears to be Fox Sports Net. Robbins had pointed to Fox Sports in the September industry conference, adding that FSN is asking for a 35% rate increase from Cox.

Robbins wouldn't tip his hand regarding his ultimate plans to drop ESPN if negotiations ended. But he did give a little insight into his thinking.

Cox seems to feel most cable operators are backing its play, something Robbins wouldn't address. Operators mostly stayed on the sidelines last year when Cablevision Systems Corp. battled the Yankees Entertainment & Sports Network, a New York City-area regional sports network that carries New York Yankees baseball and New Jersey Nets basketball games. Cablevision refused to carry YES in basic, paying a $2 per subscriber wholesale monthly rate.

Cablevision ultimately was able to place YES on a sports tier and charge only those customers who want it $4.95 per month for a package of YES, and two regional sports networks it owns, MSG Network and Fox Sports New York. Customers can also buy the individual networks à la carte for $1.95 per month.

"Let me give you a statistic [Cablevision chairman] Chuck Dolan shared with me a couple of weeks ago," Robbins said. "Of the 2 million customers that have the option to step up and buy the YES network à la carte, only 121,166 people have bought it, or 6.6%. I don't know where that all leaves you, but it suggests to me that the tiering option is not an unreasonable option at all."

Those numbers don't include Cablevision subscribers who already bought sports tiers and were grandfathered in, or those who receive the networks via other packages.

One MSO executive last week called the Cox-ESPN war of words a spectacle unlikely to win either side support. "Nobody is going to feel sorry for a company the size of Disney and nobody is going to feel sorry for a company the size of Cox," said the executive, who asked not to be named.

September