Press Release: ESPN Reaffirms Value To Cable

[Mark Holtz]

This is a press release from ESPN through Yahoo (http://biz.yahoo.com/bw/030506/65608_1.html). See if you can spot all of the spin...

ESPN Reaffirms Value To Cable
Statement Of ESPN And ABC Sports President George Bodenheimer Regarding Senate Commerce Committee Hearing

"Ripping ESPN and other popular networks out of basic cable and charging more for them is not pro consumer. This would produce a firestorm of protest from cable subscribers. With cable at $40 and the net cost of ESPN at about $1, there is no basis to take that step."

ESPN and ABC Sports President George Bodenheimer said, "Our affiliates negotiated and freely signed agreements with our current rate provisions, because they recognize and receive tremendous value in exchange. In calling for regulation, they are looking for the government to give them leverage in private contract negotiations."

"Operators continually fail to publicly acknowledge the direct and indirect revenue they generate from ESPN's industry-leading local ad sales. This local ad sales revenue offsets a significant portion of the wholesale cost. As a result, the net wholesale cost for ESPN is about $1.00 a sub per month."

"According to industry reports, the total cost of license fees paid to programmers for expanded basic cable carriage is approximately $11.00 per sub per month while the average cost of expanded basic cable service to the consumer is about $40. By paying only about 25% of its retail price for programming, cable operators' cash flow margins for expanded basic service are on average between 30 and 40%. By focusing only on the cost side and ignoring revenue directly and indirectly associated with ESPN services, they are trying to use programmers in general and ESPN in particular as the scapegoats to justify their retail price increases and preserve their high margins."

"Also, many of the major cable operators who criticize sports programming costs and ESPN actually have interests in regional sports networks, national networks carrying sports and sports teams. Most regional sports networks owned by the operators are on basic cable and sold at comparable wholesale prices. These competing networks all stand to gain from potential limitations imposed on ESPN."

"Ripping ESPN and other popular networks out of basic cable and charging more for them is not pro consumer," said Bodenheimer. "This would produce a firestorm of protest from cable subscribers. With cable at $40 and the net cost of ESPN at about $1, there is no basis to take that step."

Full Article Here (http://biz.yahoo.com/bw/030506/65608_1.html)

[Scott Greczkowski]

I believe that ESPN should become an Ala cart service, they keep yanking up the rates (and just announced another 20% increase) why should non sports fans pay for ESPN? (Plus ESPN want an addition 80 cents for its HD version!)

[Mark Holtz]

Again, this is ESPN's spin. They say the channel costs about a dollar instead of two because the cable channels receive ad revenue. They say that programming costs is $11 total, so, if you believe ESPN's math, you pay $10 for the other channels.

There are also overhead costs in running a cable company/satellite delivery system in customer service, processing bills, equipment, etc.

[RichW]

Ala carte pricing would not allow them to extort money from people who have no interest in sports and that is the REAL anti-consumer attitude. What they really should be doing is comparing the bundled price of ESPN with the bundled price of most of the other basic channels. ESPNs asking price is not commensurate with it popularity.

[dishrich]

Originally posted by Scott Greczkowski
I believe that ESPN should become an Ala cart service, they keep yanking up the rates (and just announced another 20% increase) why should non sports fans pay for ESPN? (Plus ESPN want an addition 80 cents for its HD version!)

The regional sports nets (Fox Sports, NESN, YES, etc) should ALSO become a la carte, just like they are on the Cablevision systems f/Fox NY, YES & MSG. The pricing on these channels keeps going up almost as bad as ESPN, so why should EVERYONE have to pay for these.

[Randy_B]

Originally posted by dishrich


The regional sports nets (Fox Sports, NESN, YES, etc) should ALSO become a la carte, just like they are on the Cablevision systems f/Fox NY, YES & MSG. The pricing on these channels keeps going up almost as bad as ESPN, so why should EVERYONE have to pay for these.
If the RSNs try to extort the same price increase as ESPN, I would absolutely agree. In fact any channel that wants to pull this should be made ala carte. If Nick tried this with Noggin, why should people w/o children subsidize my little ones?

The ESPN exec raises a GREAT point. Cablecos (and sat providers) always and only talk about programming rate per subscriber increases. I can NEVER remember evr hearingthem talk about the ad rates and the margins they make from the channels by insertingtheir own ads. HOW MUCH do they make off ad inserts? I am sure this is a dirty secret they keep under wraps.

Regardless, the ESPN provision to raise rates 20% per year is ludicrous. If exercised in full, it would only take 4 yrs to more than double the base cost (base $10, yr 1 $12, yr 2 $14.40, yr 3 $17.28, yr 4 $20.74). That's nuts.

[Killjoy Sam]

[QUOTE]Originally posted by Randy_B
[B]
If Nick tried this with Noggin, why should people w/o children subsidize my little ones?

People do this everyday. It's called TAXES. You pay taxes and have no say in how it's spent. I'm sure some of those monies are spent on things you or I don't like, but we have to pay them and keep going. It's not fair, but life isn't fair.

[jeffwtux]

I fail to see how taking NBA games, that were paid for by advertisers who specifically valued that programming, raising the price, and then passing the cost to people who don't specifically value the programming is doing a service. IMHO, this is still all about the NBA contract. It stunk from the very beginning. THIS IS COMING FROM SOMEBODY THAT SPORTS MAKES UP ABOUT 50% OF WHAT I WATCH!!!

[Ken_F]

jeff,

As discussed elsewhere, the NBA contract is 10% or less of what Disney is paying for sports. They would save the most money by dropping NFL football. But then, what is ESPN without professional football, hockey, basketball, and baseball?

Remember, ESPN doesn't pay equal amounts every year to the sports leagues. They agree to pay less in early years of contracts and more in later years; in so doing, they have to increase the price every year to account for the differences. DirecTV is doing the same thing with Sunday Ticket; the deal is $800 million over four years, but they are paying well under $200 million this year, which means they will need to increase the price next year and again the year after, if they don't gain significantly more subscribers.

[RichW]

That is understandable. But at least with NFLST, you have a choice to subscribe or not. You are not forced to take it as part of a baisc tier. On ecould argue that DirecTV may have to raise rates to all subscribers later in order to pay the escalating fees, but with E* not offering the package, this puts competitive pressure on DirecTV for basic tier pricing.

Disney does two dastardly things, IMHO, concerning ESPN. One is that they continue to force carriage in a basic tier when the cost of the channel is much higher than most basic channels. Secondly, they compound the problem for the consumer by requiring carriage of other Disney/ABC properties along with ESPN. So for them to tout their attitudes as "consumer friendly" is just plain wrong.

[Brett]

Originally posted by Z'Loth
Again, this is ESPN's spin. They say the channel costs about a dollar instead of two because the cable channels receive ad revenue. They say that programming costs is $11 total, so, if you believe ESPN's math, you pay $10 for the other channels.


The cable companies have it better off. They can insert local advertising during ESPN. And if there is only 1 cable system in the market, like Comcast, they have tremendous clout to secure better deals for rates with Disney.

Even if Dish or DirecTV gains many subscribers, local advertising wont work on Dish.

[Scott Greczkowski]

In the last 5 years ESPN has raised its rates 20% a year.

That means that ESPN rased rates 100% over the last 5 years.

Now let me ask you a question have you received a 100% raise from your job over the past 5 years?

When is another 20% raise going to be too much? And why are not sports fans forced to pay these increases.

But perhaps the problem is not ESPN or Disney but rather the sports leagues or maybe even the players themselves. The question is how do they do things to avoid raising rates for everyone? It's a catch 22.

[RAD]

Scott, I agree, ala cart for ESPN, and let's also break the package up, so if all you want is ESPN (really just ESPN-HD) that's all you need to pay for, not ESPN2, ESPNClassic, ESPNNews. How many customers really care about ESPNNews or Classic?

[Randy_B]

Actually 20% per year for 5 years works out to about 110% of the starting point! Talk about giving them your all.