Hockey Hardball

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Comcast Corp.’s OLN has iced the rights to National Hockey League games for the next two seasons. Now comes the hard part: getting cable and satellite distributors to pay for it.

With many affiliate deals expiring this year and a new two-year NHL deal to justify — estimated to cost $135 million — OLN and Comcast face the prospect of extracting additional fees and greater distribution from operators weary after recent fee battles with national and regional sports networks.

Before that happens, Comcast might have also obtained a National Football League package for OLN, making it even more of a legitimate national sports network. But if it can’t get pro football games, Comcast will have to hope a ratings-challenged NHL product coming off of a one-year, labor-lockout outage is enough to vault OLN into the big leagues.

“We happen to have a lot of deals that are up at the end of the year, and I think there’s no question that we believe that we’ll be expanding the number of homes that we’re available in,” Comcast president and chief operating officer Steve Burke said last week in discussing the hockey deal with reporters. “When you acquire something like the NHL, it’s fair to assume your affiliate fee will go up.”

ESPN DECLINED OPTION

The Comcast/NHL deal was announced last Thursday, a day after ESPN refused to exercise an option to match OLN’s price under a prior NHL deal that expired in 2004.

“We worked very hard to build and sustain our relationship with the league and would have liked to continue,” ESPN president George Bodenheimer said in a statement. “However, given the prolonged work stoppage and the league’s TV ratings history, no financial model even remotely supports the contract terms offered. We wish the NHL all the best.”

Earlier this year, ESPN turned down an option to pick up another year of NHL coverage at $60 million, saying it was too expensive.

By shifting from 90 million-subscriber ESPN to OLN, with 63.7 million households, the NHL will skate in front of nearly 30 million fewer viewers. But NHL commissioner Gary Bettman said he’s confident OLN will increase its base.

“By having us, OLN is anticipating, as we are, subscriber growth,” Bettman said. “If you look out a couple of years, this will hopefully be a pivotal moment in the growth of OLN.”

Network chief Gavin Harvey said OLN has “good coverage” in most of hockey’s markets, and said 90% of the network’s carriage is on analog basic tiers.

“We think that the quality of coverage will overcome that fact that we’re in fewer homes than ESPN,” he said. “We think that the affiliates will see this as a real positive and are going to want to roll this out to their fans.”

Sources close to Comcast and the NHL confirmed that the cable company would receive a $15 million “financial bonus” if the network reaches 83 million subscribers within three years.

Along with additional carriage, the network is also expected to ask operators for an increase in its current license fee of 15 cents to 20 cents per subscriber.

Burke, who joined Bettman and other officials on a conference call to discuss the deal last Thursday, would not say how much of an increase Comcast would seek. Nor is it clear if the network would seek a surcharge for the NHL product.

OPS READY TO TAKE STAND

Operators already say they’re prepared to take a hard line on rate-increase discussions, particularly for a product that’s not in necessarily in high demand at the national level with a majority of subscribers.

“Our perspective is whereas a national game of the week is nice, the real action for hockey is on the regional sports networks that carry the local team games,” said Charter Communications Inc. spokesman Dave Mack. “Unless [OLN] has some big numbers to show for the national games, it will be hard to justify a rate increase.”

Added Italia Commisso Weinand, senior vice president of programming and human resources at Mediacom Communications Corp.: “Why should I increase my costs for something that people were not calling us up to complain about not having? Plus, adding product costs to something that I had already imbedded in other network deals without getting a savings on the other hand isn’t justified.”

Industry observers believe that the NHL is the first step for OLN in moving beyond the Tour de France, Survivor reruns and competitive bull riding toward acquiring the rights to major professional leagues.

Comcast may now set its sights on acquiring the proposed Thursday/Saturday NFL package, which the league expects to make available sometime after Labor Day. MSO sources believe the one-two punch of NHL and NFL games would significantly boost value for OLN and allow it to command generous license-fee increases.

The NHL agreement calls for OLN to telecast 58 regular season games to air on Monday and Tuesday nights through the 2006-07 season, beginning Oct. 5 with the New York Rangers-Philadelphia Flyers game, according to the network.

OLN’s deal gives it exclusive rights to NHL games on Monday nights. But that won’t kick in until the 2006-07 season, because this year’s schedule has already been set.

Comcast and OLN have an option to extend the deal another year for $72.5 million, with a second option after that for three more years, league sources said.

In addition to regular-season games, OLN will offer “wall-to-wall” coverage of the NHL playoffs and two games from the Stanley Cup Finals.

The network will also telecast a post-game show after each contest.

“I think we can bring a focus to it and some storytelling and coverage that will be something new,” Harvey said. “We’re optimistic about growing the sport.”

OLN says it will improve on the NHL’s ratings, which prior to the lockout were not scoring well on ESPN.

Since the 2001-02 season, regular season games on ESPN averaged a 0.5 rating, well below the ratings for other professional leagues, such as the National Basketball Association or Major League Baseball.

Harvey said, though, that the sport would be on the top of the network’s “priority list.” And with new rule changes such as a “shootout” at the end of tied games — he believes the sport will attract new fans.

OLN has over the past two years acquired marquee outdoor sports events like Pro Bull Riding, the Boston Marathon, the America’s Cup yacht race and the Association of Surfing Professionals tour.

It has also has ratings success covering cycler Lance Armstrong’s recent run of Tour De France wins.

Still, it’s only averaged a 0.3 primetime household rating in July. So the NHL, despite relatively low ratings, could provide a significant boost.

“We’ve been building the network over the last couple of years with things like the Tour and [recently acquired reality series] Survivor,”ö OLN senior vice president of programming and production Marc Fein said. “The NHL just brings it up to another level, so we feel that the nights that we air the NHL it will increase our ratings.”

NHL NETWORK IN DEAL

Comcast also agreed to distribute the league’s Canadian-based, standalone NHL Network, although it’s unclear when that channel would launch. Bettman said the network will carry live games and initially be offered to Comcast’s digital cable subscribers.

Sources say Comcast will have to ante up $15 million if the NHL Network isn’t in front of a specified number of subscribers within two years after launch.

“Comcast has an obligation and is looking forward to carrying the NHL network to all of its customers on its sports tier or another appropriate tier,” he said. “It’s another way of getting the product out there and supercharging the fans.”

Comcast will also offer NHL programming and highlights as part of its on-demand programming packages, and has the right to stream two live NHL games per night via broadband, although Comcast senior vice president Allan Singer would not provide specific details about how that would work.

Comcast will also have rights to carry or syndicate additional games onto its regional sports networks where it has the consent of the local team and the team’s rights holder.

Comcast and OLN will sell ad time for the games, and Harvey said there’s already a “tremendous amount of interest” among advertisers in the product.

Bettman said he sees a pent-up demand from companies that have advertised in national NHL games in the past, with most committing to buy media within the national package.

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