Cox-ESPN: Barbs, Talks Ensue

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The public sparring between Cox Communications Inc. and ESPN continued last week, with executives from both companies trading barbs at industry conferences.

Cox executive vice president of operations Patrick Esser spoke first, saying that while the two parties were at least having conversations, he didn't see an early resolution to the problem.

"They just don't get it yet," Esser said at the Credit Suisse First Boston Media and Telecom Week conference here. "They need to wake up."

Later, ESPN and ABC Sports president George Bodenheimer said claims by Cox that ESPN is seeking a 20% rate hike are false. "The proposal we have in front of Cox now is for significantly less than that," Bodenheimer said at the CSFB conference, declining to elaborate.

Cox declined to comment.

ESPN executive vice president of administration Ed Durso said the proposal is similar to the multiyear deals ESPN has offered to other operators.

While Esser said he did not expect a resolution in the short-term, Bodenheimer was more sanguine.

"I remain optimistic that we will reach an agreement with Cox that will preserve our existing carriage on expanded basic," Bodenheimer said. "We've been partners with Cox for nearly 24 years, and I would expect that to continue for at least the next 24 years."

At the UBS Warburg Media Week conference, Cox CFO Jimmy Hayes said that Wall Street should see 11.5% to 12.5% revenue growth and 14% to 15% cash-flow growth from the company in 2004, in line with or a little ahead of analysts' expectations.

Hayes added that basic-subscriber growth is projected at "just under" 1%, also about what analysts had penciled in before.

Programming costs were a big topic for Charter Communications Inc. president Carl Vogel, who said that more than half of its programming contracts are set to expire in the next 12 months, presenting an opportunity to further reduce costs.

Vogel, speaking at the UBS conference, said that between 60% and 65% of Charter's contractual base will expire between the end of 2003 and the end of 2004, including deals for sports networks like Fox Sports Net and ESPN.

Vogel said during the conference that the expirations present Charter with the opportunity to negotiate better deals or to move some networks to tiers.

"Our strategy is pretty simple," Vogel said. "We need to improve programming costs. There are two ways to do that — one is to negotiate better rates and two is to migrate certain services to digital and offer customers a choice.

"I'm not going to put a stake in the ground and say I'm going to reduce programming costs by X, but it's a high priority for the company. We're going to work hard to beat the cost increases we've put into our plans."

Vogel said his main weapon in the negotiations is senior vice president of programming Sue Hamilton, who had held a similar position with AT&T Broadband before joining Charter in March.

"She has great institutional knowledge of what deals are out there," Vogel said. "I know her strategy will be to negotiate rate increases we think are fair while providing a competitive channel lineup for our customers and, where we can, move services that may have been on the analog tier for a while up into the digital tier to help drive digital penetration."

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