Congress and lots of cable viewers last week were treated to a rare spectacle: the sight of cable operators and programmers bashing each other about who's to blame for rising cable rates.
Thanks, C-SPAN. What's next, demolition derbies?
At least nobody asked about Verizon's digital subscriber line price discount.
Unlike many Senate hearings, this one got immediate action. ESPN, the network all the cable operators were talking about, but which Senate Commerce Committee chairman John McCain apparently declined to invite, cranked out a trio of press releases that popped into our inboxes as we watched.
One of them even singled out an ESPN customer, Cox Communications Inc., for its "positive economic outlook and growing new businesses."
Pretty strong stuff.
The same release referred to cable operators' "public posturing" — blaming programmers for price hikes that maintain 30-40% cash-flow margins and ignoring little expense lines like debt service and plant upgrade costs.
Cox was so mad, executive vice president Pat Esser called to offer up contract terms that contradict ESPN's claim that local ad sales slash the real wholesale cost of ESPN to $1. Esser says the net number's really $2.31 after the 20% license-fee hike in August. ESPN called back to say Cox could sell more local avails than it does, a debate that played out in our daily faxes.
We're here for both of you.
Readers might also notice that nothing stirs small-operator officials to write us letters like big price increases, especially for sports networks. They tend to attack lines of defense that underscore the "value" of said networks.
ESPN obviously has a lot of value. Otherwise, operators would never have signed the deals that ensure these annual 20% increases that get the distributors so incensed.
The real fun is going to come with the next round of contracts, which apparently mostly end in 2005. ESPN president George Bodenheimer, in a statement responding to testimony at the McCain hearing, said affiliates wanted Congress to "give them leverage in private contract negotiations."
(By the way, let's take this a step further and put those private negotiations on C-SPAN, for the benefit of consumers. OK, it'd be for our benefit as news-media snoops. OK, never mind.)
There are potential pitfalls to asking Congress to intervene under such conditions. Insight Communications Co. CEO Michael Willner pointed that out to analysts last week, saying during a conference call the day after the hearing that Washington might act in ways you don't expect — and might not like — after you bring them in.
Kind of like asking the Tony Soprano for a loan.
Fortunately, for those who agree with Willner, these calls for legislation on things like the ability to "tier" networks that cost, say, over $1 wholesale tend to go nowhere fast. Even Rep. Ed Markey (D-Mass.) said last week that Congress wasn't very interested in going there.
The more interesting calls to action are from operators that say they're willing to drop ESPN if they don't get what they want the next time around.
Get in those boardrooms, C-SPAN!