MSG, Time Warner Cable Moving Toward License Fee Disconnect - Multichannel

MSG, Time Warner Cable Moving Toward License Fee Disconnect

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Barring a last-minute rally, MSG Network's telecast of the New York Knicks-Sacramento Kings NBA game on New Year's Eve might be the last one Time Warner Cable subscribers get to see for a while.
The contract between the nation's No. 2 cable operator and the regional sports network, which, along with sister service MSG +, also televises NHL action involving the New York Rangers and Islanders, New Jersey Devils and Buffalo Sabres, expires at midnight on Jan. 1. Moreover, the parties, which have been in on-off negotiations over the past two years, don't appear to be making any headway in their dispute over new license fees.
In what has become a very public discourse with both sides running multimedia ads stating their positions since mid-December, Time Warner Cable maintains that MSG Media is seeking a 53% monthly per subscriber price hike, which it claims would make MSG the most expensive sports service in the country. MSG says the MSO is being "grossly inaccurate" and is "greatly mischaracterizing" its asking price.
SNL Kagan estimates the monthly subscriber fee for MSG and MSG+ at $2.48 and $2.17, respectively. MSG said it has some 11 million subscribers in inner and outer markets. With some 2.3 million subscribers in the New York City DMA and upstate New York, including an estimated 330,000 in the Buffalo area, where MSG televises the Sabres games, Time Warner Cable says it is MSG's largest non-affiliated distributor. MSG Media was spun off from Cablevision, which has some 3 million video subscribers in the New York DMA, in February 2010.
"[Time Warner Cable has] rejected every one of our fair proposals for nearly two years, and are unwilling to value our programming in the same manner as other distributors or even engage in good faith negotiations on behalf of their customers. We are not going to participate in unproductive public rhetoric," said MSG in a statement.

"Early ratings have already shown tremendous enthusiasm for the Knicks, the Rangers have one of the best records in the league, and there are passionate fan bases for the Sabres, Islanders and Devils. Given the approaching deadline of December 31, we continue to urge fans to find alternate providers so they won't miss their favorite teams. Fans can call 888-keepmsg (533-7674) or visit keepmsg.com for details."
For their part, Time Warner Cable officials said they were within a half of percentage point of reaching a deal -- calling for a 6.5% increase, plus payments for Fuse -- during the first week of December, before MSG began asking for a 53% hike. Time Warner Cable, which this month reached a deal with NESN, the RSN that televises NHL Boston Bruins and MLB Boston Red Sox games, dropped Fuse from 8 million of its homes on Dec. 16, stating that MSG was tying negotiations for the RSNs to the "lightly viewed" national music service.
"We're somewhat perplexed how they've gotten to the math," said Mike Angus, senior vice president, content acquisition for Time Warner Cable.

Added Melinda Witmer, Time Warner Cable's chief programming officer: "This is not a low-priced RSN seeking a big increase. It's a top of the market player, looking for an increase that would set a very high bar with serious ripple-effects across the industry."
MSG points out that Time Warner Cable has done its part to lift the price of sports programming by spending billions of dollars to make the NBA's Los Angeles Lakers the cornerstone of a pair of RSNs that will launch in southern California next year.
Time Warner Cable officials said "we've been communicating, mostly in writing, presenting many counter offers, but MSG is not backing off its stand."
MSG countered by reiterating there have been "no meaningful discussions whatsoever. We made them an offer earlier in the year, but they didn't respond and only got back to us in the11th hour," said an MSG spokesman.

"We're just asking for time Warner cable to value MSG Networks like other providers do.The last deal was structured in 2005; it's a different world."
That contract was not forged easily. In fact, it was brokered in part by then-New York Attorney General Eliot Spitzer

following various outages for MSG -- then owned by Cablevision -- on Time Warner Cable systems in the preceding months.

Sources said the agreement -- for a $4 combined monthly subscriber license fee for the two RSNs -- resulted from a split of the difference between the MSG and Time Warner Cable's proposals.

With the Knicks-Kings tipping off at 8 p.m. on New Year's Eve, Time Warner Cable customers -- unless the game is delayed or goes into multiple overtimes -- will get to see the matchup in its entirety. Starting next week, though, Knicks' telecasts against Toronto, Charlotte, Washington and Detroit and the hockey teams' contests are certainly in jeopardy.
Time Warner Cable vowed on Dec. 18 that it won't disconnect MSG. In virtually all such license fee disputes such a move would be initiated by the programmer.
In the meantime, consumers in New York and Buffalo will continue to hear about the impending darkness for the RSNs on Time Warner Cable.
In an ad in the sports section of the Dec. 30 edition of The New York Times, a picture of Knicks star Carmelo Anthony appeared under the two-deck headline: "Hallelujah NYC, It's Game Time." While pointing readers to the team's Dec. 31 game against the Kings, copy also noted: "If you're a Time Warner Cable subscriber, you could lose MSG and MSG+ on January 1. Switch TV providers to keep your Knicks. 888-Keep-MSG, KeepMSG.com."
Meanwhile, Time Warner Cable is running this radio ad on sports talk shows and other programming:

"If you're a sports fan like me, the holidays are a great time to watch our teams on TV. So you're probably getting pretty tired of MSG threatening to pull the plug. And don't be fooled by their blackout blame game. Last year, MSG blamed Dish and told you to switch. Now they're blaming Time Warner Cable and saying switch again. Next year, they'll blame somebody else and tell you to switch again. The fact is, Time Warner Cable actually agreed to MSG's original offer. But MSG got greedy...and now they're demanding a 53 percent price hike...or else they're going dark at midnight on New Year's Eve. If MSG really cared about us fans, they wouldn't be holding our sports hostage. It's time for MSG to get real...and just do the deal."
Relative to Dish, none of the New York-centric RSNs -- including YES Network, the home to MLB's Yankees and the NBA's New Jersey Nets, and SNY, which televises New York Mets baseball games and in which Time Warner Cable holds a minority stake -- are carried by the nation's No. 2 DBS provider in the New York DMA.

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