After some small cable companies complained about pricing structures proposed during the last two weeks by In Demand for the right to carry pay-per-view sports packages, the programmer decided to negotiate accommodations with those operators that would keep the content available, parties to the dispute said Friday.
While the pricing issue appeared to fade late last week, the small cable companies — which are often more vulnerable to losing customers to channel-intensive satellite providers than are bigger MSOs — are still fretting the potential loss of In Demand’s pay-per-view movie channels.
Some small operators claimed In Demand — owned by several big cable companies, including Comcast Corp. — was linking the sports packages to other content it offers, such as high-definition programming. If an operator didn’t carry the HDTV channels, it faced paying a fee of $2.25 per digital subscriber per year.
That fee was to be levied on top of the typical revenue split paid by operators. “Substantially more” than 50% of the revenue goes to In Demand and sports entities such as Major League Baseball, the National Basketball Association and the National Hockey League, said one affiliate, Atlantic Broadband CEO Dave Keefe, an operator with 248,000 customers in six Eastern states.
MOST ACA MEMBERS AFFECTED
In Demand’s pricing was a hot topic of conversation on Oct. 5, when the American Cable Association, the trade group for 900 cable companies ranging in size from fewer than 100 customers to several hundred thousand, met in Miami. ACA CEO Matt Polka said the In Demand programming issues affect most of the ACA members’ subscriber base.
But by week’s end, In Demand and system executives said the parties were negotiating “accommodations” that would allow systems to continue to offer its baseball, NASCAR and hockey packages. One of those in negotiations was critic Keefe, who said Friday that the $2.25 charge was “off the table” in his talks with In Demand. Concessions have been offered on both sides for a long-term solution, he said.
Small-scale operators are still concerned, though, over a separate issue: the possible loss of two-thirds of their theatrical pay-per-view channels in 2006.
Jacobson confirmed In Demand might make the “difficult choice” of cutting the number of transponders that now distribute movie content, an action that could cut the 21 channels currently distributed down to seven channels at the beginning of next year.
That decision is part of a natural evolution of the PPV business, he said, because the distribution of “linear” pay-per-view now accounts for a small fraction of In Demand’s revenue.
ON DEMAND ON RISE
Major operators now rely on video on demand to sell movies. According to Leichtman Research Group principal analyst Bruce Leichtman, 75% of U.S. digital-cable homes (estimated by the National Cable & Telecommunications Association to be 26 million) have access to VOD.
Among those In Demand affiliates still offering only linear pay-per-view are a handful of Comcast Corp. and Charter Communications Inc. systems, as well as Cable One Inc. properties. Most of the remaining 25% that employ dedicated linear pay-per-view channels are small and midsized systems.
Small operators contend that the sports pricing, plus the decrease in movie availability, are levers to force them into a transition into video-on-demand. That’s a leap most will take, but they want it on a timetable that’s dictated by their own budgets.
“I understand competitive pressures, but small to medium-sized operators are not figured into [In Demand’s] strategy,” Polka said.