Rocco's Rate Remedy - Multichannel

Rocco's Rate Remedy

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Mediacom Communications Corp. chairman Rocco Commisso continued his public debate with programmers — and especially ESPN — last week, calling for content companies to tie the rates they charge operators to their ratings.

"If your ratings go up, you've done a good job, then you should be paid more," Commisso said at a New York Cable Club luncheon held in his honor last Tuesday. "But if your ratings go down, you're paid less. You certainly can't have both."

Adding insult to injury is the fact that video revenue for the cable business has gone up 50% in the last 10 years, while revenue for programmers has risen six-fold over the same time frame, Commisso said, extrapolating from what he said basic cable charged 10 years ago, multiplied by subscribers.

Unit gap

The biggest reason for that disparity, Commisso added, is that programmers have benefited from unit growth over the past 10 years — mainly through subscriber gains via direct-broadcast satellite services — while cable has not grown as fast.

In 1993, when there were about 60 million multichannel video subscribers, programming costs were about $5.50 per subscriber per month, according to Commisso.

In 2003, with 90 million multichannnel homes, those programming costs ballooned to $16 per subscriber per month, he said.

Commisso estimated that in 1993, total revenue for programmers — including advertising sales — was about $6 billion. By 2003, that number had grown exponentially to $36 billion.

On the cable-system side, however, basic revenue per subscriber has only grown from about $34 per subscriber per month to $48 per subscriber per month in the same time frame.

"It would be OK if certain programming services would go up and down," Commisso said. "I can't live with everything going up. I don't believe that every service, year after year increases the share of the audience, so why should that rate go up?"

Commisso, questioned by Multichannel News
editor in chief Marianne Paskowski, gave special attention to ESPN, which has been under fire since it recently announced a 20% rate hike.

Commisso said that one channel — ESPN — charges what amounts to between 4% and 5% of Mediacom's total revenue.

"That's a huge cost," Commisso said.

ESPN notes

ESPN, which has been quick to respond to the firestorm of controversy surrounding its recent rate hike, said it does not believe that ratings reflect the total value of its networks, but that its ratings are up substantially over the past two years.

"In 2002, we had 18 of the top 20 highest-rated programs on ad-supported cable TV, and we enhanced our programming even more with high-rated products like Wimbledon and the [National Basketball Association]," an ESPN spokeswoman said in a statement. "ESPN is No.1 in upscale male delivery and the No.1 ad-supported network among men."

ESPN also disputed Commisso's claim that programming costs increased six times while MSO revenue has risen 50%.

Commisso also said that in the past, the programming rates paid by large cable operators who acquired systems declined with additional scale. But when he doubled his subscriber base to 1.6 million in 2001, his programming rates went up, because he brought from bigger MSOs.

The Mediacom chairman, who has recently been one of the most outspoken critics of programmers, said that he took on that mantle mainly as a defensive move. But he added that he would not look for further regulation of the cable business.

"The government already is in my business," he said. "I'm not going to Washington asking for reregulation. But when the government says to me 'Your rates are too high,' I have to defend myself. That's when things get hairy."

One thing that Commisso would like to see on the regulatory front, however, is the rescinding of the retransmission-consent laws, especially in light of the pending merger between News Corp. and DirecTV Inc. parent Hughes Electronics Corp.

Commisso said his biggest fear is that News Corp. chairman Rupert Murdoch will use retransmission consent for his Fox broadcast network to push hefty rate increases for his other cable networks.

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