One major sports programming deal down, one blockbuster to go: Cox Communications Inc. cleared a major programming hurdle last week with a multiyear renewal agreement to carry Fox Sports Net regional sports services, less than 30 days before its contract expired.
Cox, which has been extremely vocal about reining in the high cost of sports programming, can now focus its full attention on netting the biggest fish in the cable sports-network pond — ESPN. But executives at the total sports network said the Fox deal won't have any effect on its negotiations to secure a renewal deal with the MSO.
Terms of the new Cox-Fox Cable Networks deal for the regional sports networks were not disclosed, but published reports placed average yearly rate increases within the 7% to 9% range. Meanwhile, sources with knowledge of the deal said that Fox Sports would gain double-digit fee increases for its Arizona, South, Midwest, Southwest, Rocky Mountain and West services.
Merrill Lynch & Co. media analyst Jessica Reif Cohen also reported that the rate increases are front-loaded, with Fox gaining higher rate increases during the early years of the deal.
The agreement comes two months after Cox CEO Jim Robbins threatened to drop the regionals, after Fox asked for a 35% increase in affiliate fees. But Cox vice president of programming Bob Wilson said in a statement that the renewal deal "is a fair deal for our customers, as well as for both Cox and Fox."
For Fox, the deal places its regionals on basic cable in front of 3.3 million of Cox's 6.3 million subscribers. In separate but related deals, Fox Cable also cut Cox carriage deals for National Geographic Channel and its action-sports service, Fuel.
The NGC deal is noteworthy since Cox has long been accused of refusing to carry the service in order to protect its 25% ownership stake in rival network Discovery Channel. Fox Cable and Cox representatives refused to detail the size of the MSO's commitment. But Fox Sports said NGC, which currently counts 46.4 million homes, would end up with more than 50 million subs after the Cox deal, suggesting Cox committed to put the channel in at least 3.6 million homes.
ESPN On Deck
With the Fox Sports regional deals complete, Cox is now looking to finalize a renewal with ESPN. Both sides express confidence that a deal can be reached, but the bitter and public negotiations show no signs of abating any time soon. In fact, both companies are operating competing Web sites to present their respective cases to the public. ESPN's contract with Cox expires on March 31.
Cox has said it will no longer continue to pay annual 20% rate increases to ESPN, which at $2.60 per subscriber is far and away the MSO's most costly network. ESPN continues to argue that its fees are fair compensation for the ratings, consumer satisfaction and ad sales value the network provides to operators.
ESPN senior vice president of affiliate sales and marketing Sean Bratches said last week he was "encouraged" by the Fox Sports deal, and hopes that the network can come to a similar deal that reflects the value of ESPN.
"I'm encouraged that they came to terms and I'm sure that those terms reflected a market valuation of the product," Bratches said.
Cox director of media relations Bobby Amirshahi would only say that settling the Fox Cable deal a month in advance of our contract expiration "proves that responsible companies can go the distance to make compromises and negotiate in good faith and ultimately continue to protect and enhance the value proposition of cable for consumers."
Bratches said the network continues to be "engaged in discussion" with the network, but would not reveal specifics. "A negotiation is a fluid thing, and we're encouraged that Cox has been willing to negotiate with us directly in the last few weeks as opposed to publicly," he said. "We find that to be a very favorable turn of events."