ESPN Grilled at NCTC Meeting

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Portland, Ore. -- Just days before its annual 20% rate increase goes into
effect, ESPN Tuesday faced a room full of small cable operators who vented and
argued that they are being forced to turn to Washington for help out of
desperation over skyrocketing program costs.

"Our backs are against the wall here," said Tom Gleason, chairman of
CableDirect. "We’ve got to do something."

Gleason was directing his remarks at Sean Bratches, ESPN’s executive vice
president of affiliate sales and marketing, during the programmers’ forum at the
annual meeting of the National Cable Television Cooperative here.

During the well-attended panel, Bratches nixed the possibility of the main
concession that the co-op’s members are looking for. "I’m not interested in
selling you ESPN on an a la carte basis," Bratches said at one point.

Rather, he stressed the importance of sports to most consumers and said cable
should be emphasizing its entertainment value, and not dissecting and explaining
its costs publicly.

"I’ve got a concern about certain constituencies within the cable industry
talking vocally about their retail pricing in the market and blaming it on the
cost of truck rolls, the cost of content and the cost of the investment in their
physical plant," Bratches said.

"[Cable] is a great value," he added. "When a company is trying to sell a
hamburger, they don’t talk about the cost of raising the cow, the steer. They
talk about how the meat tastes."

During most of the session -- moderated by CableFAX Daily founder and
columnist Paul Maxwell, who donned a referee’s shirt and whistle for his duties
-- Bratches addressed a litany of polite but often pointed questions from the
audience.

The panel also included The Outdoor Channel president Andy Dale and Brad Fox,
E! Entertainment Television’s senior VP of affiliate relations, but the
spotlight was on ESPN, as its rate hike goes into effect Aug. 1.

Gleason said the NCTC and its members really don’t want Washington
interceding with regulation or helping regarding program costs.

"I agree with Sean that ESPN brings people to cable TV," Gleason said. "It’s
one of the greatest channels we’ve got. It’s too high-priced … I don’t think
anyone in this room wants to go to Congress to solve any of these problems. But
…we’re getting a little desperate."

NCTC president Mike Pandzik said his members have no control over their
programming costs. "These men and women can raise their retail rates 3% and 4%
per year, but yet they get 12%-15% wholesale increases [from programmers]," he
said.

"There is a train wreck," he added. "I know when you go to Capitol Hill, what
you get often bears no resemblance to what you wanted when you walked in the
door, but that should give you a feeling for the level of frustration. If we’re
willing to do that, we’re at the end of our rope. Let’s be partners again and
get going."

Bratches did cite several factors in ESPN’s favor in regards to its relations
with MSOs, adding that he was an optimist who ultimately believes programmers
and cable operators will resolve their differences.

He pointed out that ESPN’s annual rate increase is across the board to the
entire cable industry, and not just small systems. Bratches added that ESPN has
offered cable operators an alternative deal. That pact reduces the annual rate
increase in exchange for increased distribution of ESPN services.

"We are coming to the industry with an alternative to what the industry has
in place," Bratches said.

In fact, Pandzik complimented Bratches and ESPN for taking the time to meet
with the NCTC to discuss that alternative agreement in depth.

"We still disagree on some fundamental constructions of these deals, but that
should not detract from the fact that you guys have come out to see us," Pandzik
said.

Bratches said he was "amenable" to the idea of affiliate boards being created
to advise cable networks, just like there are affiliate boards for the broadcast
networks -- a suggestion made by Bob Gessner, president of Massillon Cable in
Ohio.

But another suggestion -- that cable operators that don’t do local
ad-insertion, or fully two-thirds of the NCTC’s members, be under a different
rate card with smaller license fees than other operators -- wasn’t really
embraced by the panel.

During the session, Gleason also sounded off on retransmission-consent talks
from the programming behemoths every three years. "They want to shove another
channel of warmed-over crap off the networks down our throat," he
said.

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