TNT: Pay New, 'Fair' Rates Or Lose Some Programming

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Operators that double dribble on Turner Network Television's upcoming rate increase may lose future TNT programming – and possibly more than just National Basketball Association games.

TNT executives said they are confident operators will accept a "fair" rate increase covering several high-profile acquisitions — including NBA games, National Association for Stock Car Racing (NASCAR) events and marquee movies and series.

But Turner warned that operators that don't ante up could lose access to some of that programming on one of cable's leading networks, in terms of ratings and adult demographics.

For their part, operators — who face hikes from TNT, a possible 50-cent monthly hit for a new channel jointly owned by AOL Time Warner Inc. and the NBA and an increase from ESPN — are ready to batten down the hatches, and fight should programming costs become too expensive.

While Turner has yet to reveal its new rate card to operators, Turner Broadcasting System Inc. president of domestic distribution Andy Heller said the network would seek a "reasonable and fair" rate increase for programming costs it has incurred over the last 18 months.

The network, which currently costs operators around 60 to 70 cents, is seeking increases to help offset AOL Time Warner's six-year, $2.2 billion NBA deal, as well as costs for NASCAR.

With respect to the new NBA deal, Turner's package is much stronger than its present contract, which expires with the end of this season.

Under the new pact, TNT gets 52 regular-season games, mostly scheduled as exclusive Thursday-night doubleheaders with no pro hoops competition from Fox Sports Net regional services or local TV stations.

The channel will also run up to 45 playoff games, including one conference-final round and both conference-semifinal rounds in their entirety. And, in a cable first, the NBA All-Star Game will air on TNT.

Along with sports, the network is still paying for acquisitions of such high-profile, off-network series as Law and Order, ER
and NYPD Blue. The network is also part of several high-profile theatrical acquisitions. For instance, TNT and TBS Superstation recently teamed up with sister broadcast network The WB to purchase first-run television rights to the popular Lord of the Rings
trilogy for a reported $160 million.

TNT is also maintaining an aggressive original-movie slate in 2002, and is producing a second season of its original series Witchblade
. The network also acquired the repurposing rights to the series Charmed
from The WB.

Heller said the network has substantially increased its programming lineup in recent years without asking for any increases in rates.

"I want everybody to take the product and pay the rate," Heller said. "But if they don't, it could mean blacking out product. I want to protect [operators] that we have reached deals with."

OP: WE DECIDE 'FAIR'

But at least one MSO executive interpreted Heller's comments as a veiled threat.

"It looks like Turner is drawing a line in the sand," said one exasperated operator. "We'll look at the deal and then we'll determine what's fair."

Another MSO official noted that while TNT has added programming, the network is already one of the more expensive networks. Any major increase could make it cost-prohibitive for the operator.

"We'll have to see the deal before we can make any comments," said the operator.

Kagan Associates Inc. sports analyst John Mansell said that Turner's pay-to-play option is not a new one, but it's effectiveness will depend on the programming that the network ultimately decides to withhold from operators.

"I think it may be a reasonable option, but it will depend upon the magnitude of the difference of cost and what gets pulled off the air," he said.

While Heller would not reveal the actual increase, sources said it would be less than 15 cents. According to sources and published reports, that was the amount of the increase The Walt Disney Co. would have sought for its recently acquired ABC Family had the service obtained a significant piece of the NBA deal.

But ABC Family officials vehemently denied that such a hike was "comtemplated, much less discussed" for the network under any NBA agreement.

Disney did pay $2.4 billion for ESPN to air 75 regular-season doubleheaders on Wednesday and Friday evenings, plus 22 playoff games, including a complete conference-final series. With the deal, ESPN becomes the first service to cover all four major professional sports (football, basketball, baseball and hockey) in a given year.

The deal also includes extensive broadband, video-on-demand and Internet rights, which the network believes will significantly enhance the network's overall value to operators.

ESPN has already said it would not impose a surcharge for the NBA games, but it still has the option to increase its rates by as much as 20 percent this year, which undoubtedly will help offset the basketball-rights fees.

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