ESPN Takes Rate Fight to Cox - Multichannel

ESPN Takes Rate Fight to Cox

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ESPN president George Bodenheimer came out swinging Thursday against Cox Communications Inc.’s and other MSOs’ vociferous complaints about the network’s high programming costs by placing the blame for rising consumer cable-bill costs on margin-happy MSOs.

Speaking Thursday at the National Press Club in Washington, D.C. -- and backed with a report from Washington-based consulting firm The CapAnalysis Group LLC showing the relatively small impact programming rates have on overall cable costs -- Bodenheimer said Cox subscribers pay "substantially" more each month for Cox's overhead and capital expenditures than for programming costs.

He added that programming costs only represent $11 of Cox’s average $40 monthly basic-cable rate.

Last month, Cox president and CEO Jim Robbins threatened to drop or move expensive sports services like ESPN to dedicated sports tiers, saying that ESPN and the regional sports networks account for only 8% of viewers but make up 32% of the MSO’s total programming costs.

Robbins also decried ESPN’s annual 20% rate increases, which have brought the network's overall cost to more than $2.50 per subscriber, per month.

In a prepared statement, Cox said,
"ESPN's 20% increases are disproportionate to the economic reality of the world today. If we raised our rates 20% per year, what do you think our customers would say?"

The statement continued, "We agree that cable is a terrific value, and we know that many of our customers enjoy watching ESPN, but the rapid and unrestrained rise of sports-programming costs is threatening the value of cable television for American consumers."

But Bodenheimer said ESPN’s cost to Cox is only $1.50 after recognizing local-ad-sales revenue the network provides to the MSO.

If Cox does decide to drop or tier ESPN, Bodenheimer promised to aggressively support Cox competitors, including direct-broadcast satellite providers DirecTV Inc. and EchoStar Communications Corp, in Cox markets.

The CapAnalysis report -- analyzing recent Federal Communications Commission and National Cable & Telecommunications Association data -- stated that in recent years, nonprogramming costs represented 57% of cable-operator costs compared with the 22% represented by programming expenditures.

In 2002 alone, nonprogramming operating costs represented 56% of total operating expenditures.

But in a prepared statement, the NCTA said the ESPN and CapAnaylsis report "oversimplifies" the economics of cable TV.

"Delivery of popular channels such as ESPN depends upon infrastructure, personnel and programming investment. But when sports-programming fees have increased significantly year-to-year due to soaring player salaries and TV rights, it's impossible to ignore these costs as a contributing factor in cable-price increases," the organization said.

ESPN’s assault comes amid a General Accounting Office report on rising cable costs, which could be released as early as Friday.

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