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New Sports Nets: No Sure Thing

8/31/2007 8:00 PM Eastern

Walking home, diverting a few blocks out of the way to hit the fee-free ATM, an insight occurred.

We can print out most anything else we want at home — concert tickets, baseball tickets, bank statements. It would sure be great if we could print money at home, too.

Which leads me to the subject of sports networks. They’ve always been seen as a good way to print money. They provide:

  • Must-have content for advertisers to reach beer- and SUV-buying males.

  • Live events, the best hedge against ad-blasting digital video recorders.

  • Fan followings that can draw big local and national audiences.

Sports leagues know their content is valuable, so they charge a lot for TV rights. Networks pass those costs along to advertisers and to paying subscribers, such as cable and satellite TV customers.

Your network get jacked up by a team threatening to start its own network unless it gets a huge bump in its rights fee? Pass it along to cable subscribers as a surcharge.

Operators might squawk about the added cost. Customers might squawk a little, too, when the cable bill goes up.

But generally, the costs get passed along, profit margins are maintained, baseball salaries go up and owners of leagues and networks get richer.

Somewhere along the way, though, the momentum swung away from the continual increase of new TV sports outlets trying to print money and demanding the kind of basic carriage ESPN has earned.

ESPN’s bitter battles with cable operators over getting a huge rate increase, while maintaining basic-channel status, have faded into memory. But they were intense at the time.

After lots of harsh words and jawboning by companies like Cox Communications and Mediacom Communications, ESPN got all its deals done, locking in long-term agreements that at least gave operators the ability to budget for increases. And when newcomers like Verizon Communications come along, they buy everything ESPN has in order to get the core networks any video provider has to have to survive.

Major League Baseball, by luck or design, ignited a bidding war over its “Extra Innings” out-of-market package of pay-per-view games. As part of the deal, it secured significant carriage on top cable firms and DirecTV for its planned MLB Channel, launching in 2009. That was a success story, helped by Congressional overreaction to the possible loss to cable customers of baseball’s Extra Innings to a DirecTV exclusive.

Then there’s the NFL Network. The National Football League, the most powerful sports entity on the planet, couldn’t take a package of nationally exclusive games and get basic carriage on most cable systems in the country. Time Warner Cable punted, even though Dish Network has NFL Network and DirecTV has the exclusive “NFL Sunday Ticket” out-of-market package.

Comcast so far has won the right to distribute the NFL Network on a sports tier even though the NFL Network demands broader carriage. That case is still in the courts. But if Comcast succeeds, the NFL Network might be forced to accept tier status in order to get widespread cable carriage.

Another national sports network with live games, NBA TV, reportedly is on the verge of being sold by the National Basketball Association to a media partner — Turner Sports being the prime candidate, Multichannel News and others reported.

The hoops league apparently feels someone else might do a better job at expanding its base beyond 12 million homes.

Now comes Big Ten Network acknowledging it likely would launch Aug. 30 without Comcast. And likely without key in-market affiliates Time Warner or Mediacom at launch, either, though Insight signed on last week.

Cablers are balking at the cost, around $1 per customer plus basic carriage in markets key to the college sports conference’s 11 schools.

Cablers also don’t want to see a string of new conference-backed sports networks coming in with similar demands on other markets.

My sense is cable subscribers shrugged off the loss of the NFL Network, which suffers from the presence of home teams’ games on broadcast outlets in local markets.

Will BTN be different? It won’t have the biggest conference games, such as Michigan vs. Ohio State. But BTN will have lots of exclusive games, including ones featuring some top teams.

DirecTV, AT&T and wireline overbuilders will have BTN.

As the football season and even longer basketball season play out, the overall effect on operators could be “relentless,” as one in the pro-BTN camp put it.

Over time, Fox and the conference could well achieve their goals and get basic carriage on most if not all big in-market distributors.

But it won’t be easy.

The days of printing money are over.

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