TNT Keeps NFL Surcharge In New Rate Card

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On the heels of ESPN's 20 percent rate-card increase,
Turner Network Television is floating its own rate increase, despite the loss of its half
of the National Football League cable deal to ESPN.

Moreover, TNT will not rescind the 12-cent-per-subscriber,
per-year surcharge that it imposed in 1991 to pay for the NFL package that it bought the
year before.

The news angered some operators, which were expecting that
at the very least, TNT would not raise its rate, and that it would possibly even rebate
them for the loss of the eight-game, $400 million NFL deal. But sources close to Turner,
and several operators, said Turner's licensing fees are still relevant due to the
network's recent $890 million National Basketball Association deal.

One top five MSO defended TNT, saying that it's ESPN,
and not Turner, that's rocking the boat.

"TNT was the one that acted responsibly when it came
to the NFL deal," the operator said. "They've always done a good job, and
they have made significant improvements in programming."

Operators began to catch wind of Turner's proposal at
the same time that ESPN was pitching operators on its 20 percent increase for obtaining
TNT's NFL package.

On top of maintaining its current rate -- which is around
50 cents to 55 cents per subscriber, per year, with the "surcharge" -- TNT is
pitching an additional 2-cent to 5-cent increase, most likely to subsidize costs for new
programming acquisitions and original fare.

With TNT's cable-subscriber base at close to 70
million cable households, the increase could cost operators between $1.4 million and $3.5
million. ESPN's rate increase -- which, the network said, is for the whole service,
including the full NFL season -- is expected to cost operators close to $10 million,
although they will recoup a small slice of that amount from 46 local-ad avails that ESPN
is giving them.

The ESPN/TNT combination is a one-two sports punch that
operators are finding hard to take. With Congress and the Federal Communications
Commission breathing down operators' backs to lower rates, executives said they now
have to pay a premium for the NFL on ESPN, yet still pay TNT its surcharge, even though
TNT lost the marquee sports package.

"The consumer loses again," said Ron Martin,
chief operating officer of Buford Cable TV. "I'm a billing agent for [TNT and
ESPN]."

"We generally don't like to pay twice for the
same thing, or for something that isn't there anymore," said one top 10
operator.

Representatives from TNT would not comment on the matter.

But sources close to the company justified the increase by
pointing to the recent renewal of its NBA deal. At $890 million for four years, Turner
paid more for the latest NBA contract than it did for its previous NBA and NFL packages
combined. And with about 120 regular-season and playoff games, compared with nine
regular-season NFL games, operators have more advertising-revenue opportunity with
basketball -- although many of those NBA games appear on TBS Superstation.

Further, the extra price increase is "fair" after
factoring in the marquee programming that Turner has obtained over the past year, those
sources argued. The network has paid millions of dollars to acquire broadcast rights for
such movies as As Good as It Gets, I Know What You Did Last Summer, Wag
the Dog
, The Wedding Singer and U.S. Marshals --and, last week,
Lost in Space
.

TNT also paid close to $1 million per episode last year for
popular broadcast series ER, although much of that cost will be made back as a
result of the network selling ER episodes during the weekends to syndicated
stations.

Still, operators were upset. One operator said the TNT deal
was particularly disturbing since it followed so closely behind Turner's
controversial conversion of TBS Superstation to a basic service, which upped rates for
that network.

"People are still bent out of shape over [the TBS
conversion]," the operator said.

And apparently, ESPN is further fueling the flames. Another
top 10 operator said that during ESPN's rate-increase presentation, the network asked
why TNT wasn't slicing its old NFL surcharge off its license fee, since it lost the
games.

ESPN's 20 percent annual increase comes on top of a
hike of roughly 10 percent, in some cases, that the network employed last year. With
yearly fees already within the 85-cent to 95-cent range -- the lower range dependent on
incentives such as distribution of other ESPN-related services, channel placement and
marketing efforts -- a 20 percent yearly increase would certainly push the network's
licensing fee to well over $1 per subscriber, per year.

Linda Moss and Kent Gibbons contributed to this story.

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