View Full Version : ESPN 20 Pct Rate Hike Expected by Cable Operators
Mark Holtz
05-01-03, 11:48 AM
Ok, all those of you who weren't expect this, raise your hands.
Hmph..... thought so.....
From Yahoo/Reuters (http://story.news.yahoo.com/news?tmpl=story&cid=597&ncid=772&e=5&u=/nm/20030501/tv_nm/media_espn_dc):
ESPN 20 Pct Rate Hike Expected by Cable Operators
Walt Disney Co.'s sports channel juggernaut ESPN is expected to announce this week a 20 percent rate increase, cable and satellite television broadcasters said on Wednesday.
The hike comes as operators are loudly protesting the cost of programming, especially ESPN, even though the network is considered crucial by many cable and satellite companies and the price increase is in line with past years.
ESPN acknowledged that it would mail letters to customers on about Thursday with news of a rate increase that would take place on Aug. 1, but declined to comment on the amount.
For cable and satellite operators, the cost is believed this year to amount to more than $2 per customer per month, which is many times what other channels cost.
"This is like a cup of coffee a month. They (operators) continue to rate us the most important program to their cable systems," ESPN spokeswoman Katina Arnold told Reuters.
Full Article Here (http://story.news.yahoo.com/news?tmpl=story&cid=597&ncid=772&e=5&u=/nm/20030501/tv_nm/media_espn_dc)
The article notes that DirecTV will pay the rate hike even though they oppose it.
TNGTony
05-01-03, 12:48 PM
I want the 4 major cable cos and both satellite nets to say, "no thanks". Won't happen, but that is the only way that Disney will get the message.
See ya
Tony
Hmmm....and some were wondering why DirecTV hadn't picked up ESPN-HD yet? Sounds like Disney is trying to milk a cash cow and we viewers are caught in the middle.
Randy_B
05-01-03, 01:44 PM
They (operators) continue to rate us the most important program to their cable systems," ESPN spokeswoman Katina Arnold told Reuters.
The increase is not because it is needed, but because they can.
their is no way the sat providers can swallow $2 a head/month. Sounds like it is time for ESPN to become an option in our packages. In 6 yrs with E* and mucho years before with cable, I can easily say that I may have tuned in an ESPN program 5-6 times in ALL those years. 2 of those times were this year for the NCAA tournament.
angiodan
05-01-03, 01:57 PM
The only time I watch ESPN is NHL playoff time. And if its on ESPN2, I'll watch the game on Center Ice instead. So, bring it on as an option choice, I'll add it every April for two months and then dump it, rather than our bills get jacked up because of one channel.
ESPN-HD, I'm at the point now where I could care less, even though I would have loved it for the playoffs.
Tomsoundman
05-01-03, 02:03 PM
Well, most everyone else in America watches ESPN pretty often, if not daily.
Mike123abc
05-01-03, 02:49 PM
Originally posted by Tomsoundman
Well, most everyone else in America watches ESPN pretty often, if not daily.
Actually that is pretty much not true. ESPN is not even the cable channel with the highest ratings (last two weeks was Fox news). If you look at sport 4/14 - 4/20 ESPN did not even have a show in the top 10. ABC/UPN/CBS/NBC/PAX had the top 10 sports events. That is right even UPN and PAX had higher rated shows.
ESPN gets a 2.4-4.0 rating or 2-3 million households a night a fairly tiny fraction of the US watches ESPN every day.
What ESPN has is a "must have" status by a vocal sector of the population.
jeffwtux
05-01-03, 03:09 PM
Randy and Dbronstein: that's ludicrous. They already raised rates in January by $2. They are getting tremendous heat and flack for doing this, Disney is losing money in every other sector and can't afford to lose money with ESPN. There is no way they would make 2 significant price hikes(that are each more than most channels cost altogether) in 8 months, if they didn't have to. There are just as many "essential" stations, that a cable company would never ditch, they don't cost a fraction of what ESPN charges. They are doing this because they are losing money on their NBA contract which was an outrage from the beginning. I think if Dish and Direct worked together they could put serious pressure by rejecting ESPN for a month in the summer, like August(even if cable wouldn't).
Oh Dbronstein: you asked if I could reject just ESPN, would I? Absolutely! I wouldn't do it forever, just after my the Red Wings were eliminated till football started. If a significant number of people ditched ESPN even for a little while, that would crush Disney.
Lyle_JP
05-01-03, 03:26 PM
It's time to drop ALL sports channels from ALL general channel packages! Just make a sports channel package which has all the ESPNs, RSNs, YES, etc. and charge whatever the heck you need to charge for it, and pass the savings on to us TC, TC+, AT-50, AT-100, etc. customers who couldn't care less.
I'm acutely aware that virtually every price increase I've had with Dish has been sports related, and I'm sick and tired of watching my bill go up every year because someone else is obsessed with watching knuckle-dragging college dropouts hit a ball/carry a ball/dribble a ball out of the park/up and down the field/up and down the court!
jeff,
They already raised rates in January by $2. That's not true. They didn't raise rates by $2 in January. The last announced rate increase was in 2002. Don't confuse contract renewals with rate increases.
Their current agreement with cable and satellite providers stipulates that they can raise the price up to 20% per year for the length of the contract. Some providers are currently paying $1.80 or less per month per subscriber for ESPN, while others are paying as much as $2.20, depending on when they last renewed their contracts. This increase will add 20% on top of that, or 30 to 45 cents, depending on the provider.
They are doing this because they are losing money on their NBA contract which was an outrage from the beginning.Disney is paying $400 million a year for the NBA, which is only 10% of the $4 billion they are paying for sports this year.
You can argue that ESPN vastly overpaid for the NFL, MLB, and NHL contracts. But in each case, they were bidding against FOX, CBS, TNT, and/or NBC, among others. In retrospect, we know that the six year, $2.4 billion dollar NBA deal is $200 to $300 million (over six years) more than NBC and TNT were offering. Sure, ESPN could have abstained and let one of these other networks win sports contracts, but what good is ESPN without the NFL, NBA, NHL, and MLB?
The fact is ESPN is a very expensive channel to run. This year, Disney is paying, for sports, more than twice as much as Time Warner is spending on movies for its HBO and Cinemax channels. Yet HBO commands about $6.50 for its package, more than three times the current cost of ESPN for most MSOs. Obviously, ESPN benefits from advertising revenue, and it's not clear how much Disney would have to charge for ESPN without advertising revenue from its 87 million subscribers.
With escalating costs of sports programming, ESPN is obviously trying to preserve current levels of profitability for the channel. Here's a quote from a recent article in Broadcasting & Cable:But, between the escalating cost of sports rights and ESPN's grab for more sports and games, the network isn't quite as lucrative as it used to be. Morgan Stanley media analyst Richard Bilotti says ESPN's sports-rights payments have surged from $525 million in 1997 to $2.2 billion [$4 billion total for Disney] this year. That has sliced operating profit margins from a huge 52% to a more modest 20%. He expects operating profit on ESPN's main channel to fall 14% this year, to $575 million, despite a 16% increase in revenues [from new subscribers and higher rates], to $2.8 billion.
Richard King
05-01-03, 03:57 PM
Well, most everyone else in America watches ESPN pretty often, if not dailyI seriously doubt that. I think I can probably count on my two hands the number of times that I have tuned into ESPN.
It's time to drop ALL sports channels from ALL general channel packages! Just make a sports channel package which has all the ESPNs, RSNs, YES, etc. and charge whatever the heck you need to charge for it, and pass the savings on to us TC, TC+, AT-50, AT-100, etc. customers who couldn't care less.You may not care about sports, but there are many people that do.
If you separate ESPN and RSNs from the standard subscriber package, the provider might save $3--though the full $3 would not be passed on to customers, because programming costs do not directly correlate to how much the customer pays. So let's suppose that removal of ESPN ($2.00/mo) and their local RSN (avg ~$1/mo) will cut $1.00 to $1.50 off the bill of every customer.
But then, due to the increase in ESPN / RSN rates to compensate for lower advertising revenues, providers will probably have to charge $10-$15/mo for a package of those channels. How do you think that is going to make sports fans feel? Sports fans would much rather have that $0.50 to $1.00 raise each year than having to pay an extra $15/mo for a sports package. If you try to sell sports separately like that, you'll get 10% to 20% of subscribers jumping ship to a competing service.
Even without ESPN and the regional sports channels, you get lots of sports on local channels and general interest cable channels. I think that at least ESPN should be dropped from AT-50.
Also, let's not forget that as part of that monthly fee, the cable and satellite providers receive advertising time. ESPN allocates 20% of all advertising space to the local cable affilate / satellite broadcaster. According to Disney, advertising on ESPN nets the average MSO an average of 70-80 cents a month, substantially reducing the effective cost of the channel.
jeffwtux
05-01-03, 04:56 PM
The difference between those other sports is that they aren't using cable/DBS to make up for a decline in ad rates. NBC lost money on their last contract and now ESPN/Disney is paying more. Clearly, nobody is demandind a higher price. Not advertisers, and cable/dbs subscribers have no choice.
DarrellP
05-01-03, 05:22 PM
Lets see, how much ABC/Disney/ESPN do I watch?
ESPN: Can't remember watching 1 thing.
ESPN2: An occasional Bodyshaping.
ABC FAMILY: Alias Marathon New Years 2002.
ABC: Alias OTA only.
DISNEY: My 6 year old daughter watches this, Rollie Pollie Ollie, PB & J Otter and Bear in the Big Blue House.
That's it for me, yet I have to shell out over $2/month to watch what amounts to the Disney channel about twice/week.
Suck it up, Disney, get real.
Greg Bimson
05-01-03, 07:01 PM
You all need to realize ESPN can negotiate which package it wants to be in.
So, in order to get ESPN and RSNs into their own package, laws must be changed in order to revoke any channels' rights to be able to negotiate package placement.
Fat chance.
Originally posted by Ken_F
You may not care about sports, but there are many people that do.
Fine. Let the people who care about sports now pay the frieght for the greedy team owners, the arrogant millionaire players and the morons at the networks who negotiate the carriage contracts and leave the rest of us out of it.
But then, due to the increase in ESPN / RSN rates to compensate for lower advertising revenues, providers will probably have to charge $10-$15/mo for a package of those channels. How do you think that is going to make sports fans feel? Sports fans would much rather have that $0.50 to $1.00 raise each year than having to pay an extra $15/mo for a sports package. If you try to sell sports separately like that, you'll get 10% to 20% of subscribers jumping ship to a competing service.
Why should I care how sports fans feel ? They're a big part of the problem ! They complain about skyrocketing ticket prices and over-paid athletes, but never use their wallets to send a clear message that they're fed up with it. I also don't care how Showtime subs feel about paying $12 a month, when we could all pay an extra $2 and allow them to enjoy paying $10 less. Same principle.
I'm sure "sports fans would much rather have that $0.50 to $1.00 raise each year than having to pay an extra $15/mo for a sports package"; I'm just as sure heroin junkies would also love to have their addiction subsidized by the public :p
Use HBO as a model. Providers could add HBO to basic packages and raise the basic rate by say $2 a month -OR- make those who want HBO pay $10 - $12 and leave it out of basic. I say RSN's and ESPN are no different and deserve no special consideration, so if dropping them lowers my bill by $2 a month I vote to drop them.
Take the excessive money out and the bloated sports system we have now collapses down to something more managable, maybe like it was 30 - 40 years ago. Team owners' bottom line shrinks and they have to try a recapture disenchanted former fans, so ticket prices drop and player salaries shrink. Players realize they need the fans more than fans need them, so civility returns to the players' vocabulary. Lower ticket prices and players' newfound humility make it possible for families to return to the ballpark/stadium/arena and a generation of kids can learn to love the game in a way that was impossible before. A new golden age of sports begins.
Hey, a guy can dream, can't he ? :D
As Greg notes above, as a practical matter, the cable and satellite companies don't have the option of moving ESPN and RSNs out into a separate tier.
In all likelihood, Disney's position is "ESPN in your standard package at $2, or no ESPN at all." And most cable and satellite companies are unwilling to lose the 10% to 15% of subscribers that are hardcore sports fans.
Randy_B
05-01-03, 09:34 PM
You may not care about sports, but there are many people that do
No doubt, these folks should have the privelidge to pay for what they so enjoy.
If these channels can't recover the ridiculous fees they pay to the sports associations through their advertising, then the general public shouldn't shoulder the cost.
With escalating costs of sports programming
The escalation is artificial. It is pure greed from the owners and players. No ONE player is worth a 1/4 of a billion dollars!!!!
Well, most everyone else in America watches ESPN pretty often, if not daily.
BULL! Prove it. ESPN has NEVER shown up in the cable ratings. SpongeBob Squarepants gets higher ratings!
jeffwtux
05-02-03, 12:04 AM
"BULL! Prove it. ESPN has NEVER shown up in the cable ratings. SpongeBob Squarepants gets higher ratings!"
Yeah, I remember a few years ago when wrestling on TBS and TNT was consistently beating Sunday Night NFL football. I say ditch ESPN for a few months. If they pass on 100% of the savings, they might not lose many customers if any. They could even use the lower price as a promo campaign. If they don't lose too many customers, it might make others follow and ESPN cave in crushing the NBA contract.
grassvalley
05-02-03, 03:57 PM
The biggest problem is the amount of money ESPN shells out to pro teams. These players and owners are making millions of dollars. Popular teams are making a lot of money with gate receipts. Teams like the Blue jays need TV money to survive.
The second problem is ESPN is the only cash cow Disney has. The movie division has ups and downs. Even before 9/11 the theme parks weren't pulling in any money. After the attacks the parks were killing Disney at an alarming rate.
Maybe ESPN will be best under ownership by the cable companies (Comcast, TW and Cablevision joint ownership)? This way, the cable companies cant complain about Disney's demands... because then they'd own the channel and would be dealing with the sports leagues directly.
Echostar would no longer have Disney at their backs forcing them to take the channel in the most basic level. If Echostar doesnt want it, the cable companies would be happy of keeping it cable only.
As for the Disney company, I dont know what would be best for them. It seems they are holding on as tight to ESPN and using it for all its worth. The ABC Network is #4 now. Its not going to help given they have fewer O&O stations than Fox and CBS. Its likely Scripps can end its deal with ABC (and not renew it), and go with CBS. This would cause ABC to move to UHF in more markets than it would want, such as Detroit and Cleveland. Maybe Disney should be thinking of selling ESPN off, and merging its ABC Network, O&Os, Disney movie & cable unit with Hearst, Scripps, or Tribune. These are affiliate groups (diversified companies) that own VHF stations in top markets, newspapers, magazines, certain cable channels.
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