Ops Battle Fox, ESPN Over Sports Rights

Author:
Publish date:
Updated on

Skirmishes between operators and sports networks over
licensing deals continue to break out across the country, as both sides remain miles apart
over the value of sports programming.

Fox
Sports Southwest
will go back to the negotiating table with Marcus Cable Co. L.P. this week, after
cutting off its signal last Tuesday to the MSO's Texas systems over a contract dispute.
Fox eventually restored the signal later that day, but both sides admitted that several
hurdles still have to be cleared before they reach an accord.

Meanwhile, operators continued to stew over some of the
fine print in ESPN's upcoming 20 percent rate-increase proposal -- including terms on the
positioning of ESPN-related services -- even though the deadline for signing agreements is
less than one month away.

Finally, both ESPN and Fox are fighting a proposal by
Ohio-based MSO Massillon Cable to place sports services on a tier. The MSO, saying that it
is fed up over the high cost of sports services, is planning to survey customers as to
whether they would pay for sports programming.

Fox Sports Southwest discontinued its signal to Marcus'
175,000 Texas customers last Tuesday morning, after the two companies couldn't come to
terms on a new carriage deal. Fox had been distributing the service to Marcus even after
its previous affiliate agreement expired in December.

"We've been trying to get Marcus Cable to sign a
contract, but we've been unable to negotiate with them," said Jim Martin, executive
vice president and head of business operations for Fox/Liberty Networks. "We had no
other recourse but to turn them off."

However, at the urging of Tom Hicks, owner of Major League
Baseball's Texas Rangers, Fox Sports turned the signal back on minutes before its 7
p.m.(CST) telecast of the June 23 Rangers-Arizona Diamondbacks game. Both sides agreed to
continue to negotiate a carriage agreement in good faith.

At issue is Marcus' insistence that Fox, which charges
about $1.25 per subscriber for its service, provide a guaranteed number of telecasts for
each of its professional- and college-team packages.

"Part of it has to do with Fox's unwillingness to
guarantee the games," said Lou Borrelli, executive vice president and chief operating
officer for Marcus. "We're continuing discussions, but we're very disappointed and
upset about what they did."

Contract language is also the sticking point for operators
negotiating ESPN's 20 percent rate hike. The National Cable TV Cooperative, which
represents small MSOs, reported last week that it had received several calls from members
who voiced concern about the ESPN amendment provision regarding channel positions for ESPN
and its sister channels.

They were complaining that operationally, it would be hard
to rejigger their lineups in order to get the additional-rate discounts that the
"channel-position-adjacency" clause requires. According to the contract,
affiliates have to ensure that no fewer than 25 percent of affiliate subscribers receive
either ESPN2, ESPNews or ESPN Classic Sports on adjacent channels at or below channel 30,
effective December 1999. Further, operators would have to place ESPNews and Classic Sports
between ESPN and ESPN2 on their lineups.

Yet another operator wasn't happy with an ESPN amendment
provision that bars cable systems from inserting on local ad avails -- on either ESPN,
ESPN2 or ESPNews -- any tune-in ads or tune-in promos for non-ESPN sports services or
sports-news services.

In other words, operators can't run tune-in spots on ESPN
or on its sister networks for Turner Network Television's National Basketball Association
telecasts, or for any events on regional-sports services like the Fox regionals.

The contract apparently does allow operators to run tune-in
ads or promos for pay-per-view.

Concerning channel positioning, an ESPN spokesman confirmed
that the network does provide incentives for lower-channel positioning -- which ESPN
believes increases rates and local advertising revenue.

The network would not comment on the ad-avail controversy.
A source at the network, however, confirmed that the company will tighten up guidelines
for the use of ESPN ad avails, including the prohibition of day-and-date-specific sports
ads, but he would not provide further information.

While one top 10 MSO executive called the provisions
"annoying," he stopped short of calling them deal-breakers.

"It's not a major concern for us -- we don't have the
channel capacity to launch any more services, and as long as they don't prohibit PPV ads,
then we can deal with it," the operator said.

But another operator, who was upset over the skyrocketing
costs of sports programming, is taking things a step further. As a "trial
balloon," Bob Gessner, vice president of 45,000-subscriber Massillon, said he's
preparing to survey to subscribers on whether to create an all-sports tier and to find out
whether they would pay $5 per month for it. The tier could include ESPN, ESPN2,
SportsChannel Ohio, ESPNews and Fox Sports Ohio

Gessner said he plans to have his attorney examine his ESPN
contract, but he claimed that the new amendment "allows me a window of opportunity to
put [ESPN] someplace other than basic." He also claimed that a new provision only
makes operators pay fees for the actual number of customers who get ESPN, and not the
MSO's total subscribers.

But Sean Bratches, vice president of affiliate sales and
marketing for ESPN, said in a prepared statement that Massillon recently signed an
extension through 2005 "that contemplates basic or expanded basic only."

Steve Liverani, senior vice president and general manager
for Fox Sports Ohio, also said his contract with Massillon mandates basic carriage.

Related