Programming Costs, New Services for Openers

6/12/2001 7:34 AM Eastern

Chicago -- Monday's National Show opening general session created few sparks,
but it proved to be an interesting mix of programming and distribution heavy
hitters: Viacom Inc. chief operating officer Mel Karmazin, Comcast Corp.
president Brian Roberts, Charter Communications Inc. president Jerald Kent and
AT&T Corp. chairman C. Michael Armstrong.

While panelists started off defending their respective broadband strategies,
the topic quickly shifted to high programming costs.

Kent once again used a public platform to try to jawbone high rate increases
for ESPN, a service Charter is compelled to carry on basic tiers for contractual

'When I stay up at night, I worry about two things: my kids and
sports-programming costs, and not necessarily in that order,' Kent said. 'My
programming costs are going up at double-digit rates primarily because of
sports-rights fees.'

'We're looking out for our interests in things like video streaming,' Kent
added later, referring to another Charter battle with ESPNews over streaming
rights. 'It's all about protecting the customer and making sure my customers
don't end up having to pay for something that other customers get for a lower

Kent once again said federal antitrust exemptions for sports leagues work
against cable, adding that the exemptions should be eliminated or networks that
carry such programming should be required to let operators offer them on a la
carte basis. That was the only applause line of the session.

Roberts suggested that technology could be the answer in combating high
sports costs, by allowing operators to insert local commercials in national
games. But Karmazin warned that sports rights were likely headed up. 'AOL [Time
Warner Inc.] will potentially be a bidder. Yahoo! [Inc.] will be a bidder for
sports,' he said. 'Rights fees are going to go up.'

After the session, Armstrong responded to a question about whether MSO
AT&T Broadband's assets might get put up for sale. 'It's not for sale,' he

He also tried to explain that AT&T Broadband's relatively low cash-flow
margins were related to the assimilation of disparate assets, including ones
bought from Tele-Communications Inc. and MediaOne Group Inc. 'This has all come
together in the past 12 months,' he added. 'We have lower-than-industry margins.
We're going to fix them.'

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