Howard to Rockets unlikely to get CSN Houston carriage dispute settled
On back-to-back days earlier this month, Jarred Cosart and Dwight Howard gave Houston fans ample reasons to dream of better days.
Cosart, arguably the best pitching prospect in the Astros' system, took a no-hitter into the seventh inning of his major league debut and claimed his first career win against the Tampa Bay Rays.
The next morning, more than 10,000 fans jammed into a downtown park to welcome Howard, the NBA's top-ranked free agent, to the Rockets to play alongside James Harden, Chandler Parsons and Jeremy Lin.
For Astros fans, Cosart's debut gives credence to general manager Jeff Luhnow's long-term rebuilding plan as the team struggles toward what likely will be a third consecutive 100-loss season.
For Rockets fans, Howard represents arguably the final piece of the puzzle in the team's drive toward contention for an NBA title.
But the harsh reality for daydreaming fans is that neither Cosart nor Howard, at least for the moment, packs enough marketing punch to guarantee that all Rockets fans in the 20-county Houston designated market area and all Astros fans across a five-state area will have full access to their games on Comcast SportsNet Houston.
One analyst, in fact, recently predicted that full access for fans who subscribe to DirecTV, Dish Network, AT&T U-verse and other systems will require not only months, but years, to become reality.
And so hope and determination are mixed with - and heightened by - anger and frustration as the Astros return to Minute Maid Park on Friday after the All-Star break and Howard works out with Parsons, Harden and others in advance of Rockets training camp this fall.
"It is inappropriate to go into another season without our fans throughout the Houston area being able to see our team," said Rockets CEO Tad Brown, a member of CSN Houston's four-member board of directors. "We're going to do everything possible to see that the deals happen. Carriage is the only thing that matters to the fans. Everything else is just window dressing."
CSNH 'has been a bust'
CSN Houston, which launched in October 2012 and is owned by the Astros, Rockets and NBC Sports Group, is available in about 40 percent of the 2.2 million TV households in the Houston area and in scattered pockets across Texas, Oklahoma, Louisiana, Arkansas and New Mexico.
Owing to its inability to reach full carriage, the network has become symbolic of the ongoing national faceoff between revenue-hungry teams and networks and cost-conscious cable, satellite and TV providers.
SNL Kagan, which compiles research and information on the media and communications industry, said in a recent report to subscribers that while the regional sports network model continues to succeed in some markets, CSN Houston "has been a bust."
"Unless the Rockets and Astros can step up their game, few fans are going to tune in and give CSN Houston the ratings that would warrant wider distribution within its footprint," the report said.
SNL Kagan predicts CSN Houston will be unable to strike carriage deals until 2014 with Suddenlink, which services the Kingwood area and dozens of other markets across the five-state area, and 2015 with DirecTV. No projection was given for U-verse, and SNL Kagan said a deal with Dish Network is "unlikely," given its current stance on subscriber fees with regional sports networks.
A former AT&T official recently told an industry conference in New York that "viewer intensity" was so low in one of its key markets - presumably Houston - that U-verse did not fear losing customers if it delayed signing a deal with CSN Houston.
And one network official said privately this week that even with Howard in a Rockets uniform, CSN Houston's requested monthly subscriber fee is still too high.
Team and network officials disagree with the carriers and the analysts on both fronts.
Matt Hutchings, president and general manager of CSN Houston, has described the Howard signing as "a game-changer on multiple levels" and said CSN Houston "is very much in demand" by local viewers.
Price remains a key issue for both sides, but distribution is critical, too, and the unique nature of the CSN Houston footprint continues to complicate matters.
Rockets games are limited by NBA territorial restrictions to the area stretching northeast from the Rio Grande Valley into Central and Northeast Texas and portions of Louisiana. However, Rockets games cannot be seen in Dallas-Fort Worth, San Antonio or Austin, the other three major markets in Texas, or in the area west of Interstate 35 because of those restrictions, which blunts the impact of Howard's acquisition.
Astros games, by comparison, can be beamed across the entire five-state region. But the Astros share the territory with Rangers games on Fox Sports Southwest, which has been carried for decades by most satellite and cable providers. And for fans across north and west Texas and, increasingly, along the Interstate 35 corridor, the Astros are a relative afterthought to the Rangers.
Astros barely a blip
While it would benefit the Rockets to agree to a deal that would provide immediate, full carriage in the Houston "inner market" while talks continue on the outer markets, Hutchings confirmed once more last week that all of CSN Houston's carriage talks focus on a deal that would cover the entire five-state region.
While carriage talks continue, the Astros - and, as a result, Major League Baseball itself - have become an afterthought to many Houston fans as well.
Astros games at the midway point of the season were averaging a 0.43 Nielsen rating, with an average audience of about 10,000 households. That's down 66 percent from last year, which would be consistent with the drop from full carriage on FS Houston last year to CSN Houston in 2013.
Sports Business Journal notes that the Astros' 2013 rating is the lowest for any MLB team since 2008.
While Astros viewership has dropped, local viewers in the area have not flocked to the Rangers, whose games are averaging a 0.16 Nielsen rating in Houston.
In large part, the Astros and Rockets signed with Comcast, which outbid Fox Sports and DirecTV for the rights to start the new network, because of its superior reach in the Houston area (about 680,000 households, according to SNL Kagan, to about 300,000 for Dish Network, 340,000 for U-verse and 380,000 for DirecTV).
But the inability to sign carriage deals means CSN Houston continues to fall short of revenue projections.
Astros owner Jim Crane said in mid-May that the network faced "tough decisions" as a result of its limited revenue and that additional investment would be required from the Astros, who own 46.4 percent of the network, the Rockets (30.9 percent) and NBC (22.7 percent).
SNL Kagan estimates that the network will have negative cash flow of almost $200 million over its first three years and will not become profitable until 2015. It estimates that monthly subscriber fees averaged $2.80 in 2012 and will increase to $4.17 per month by 2017.
Hutchings, however, said CSN Houston has not had to reduce coverage because of limited income and that the network partners "have expressed their belief in this business and fully support it."
As with every logjam, it just takes one agreement, be it with DirecTV, U-verse, Dish or Suddenlink, to get the ball rolling in the network's direction. From the Rockets' standpoint, Brown believes Howard is just the guy to get things moving.
"Dwight is going to provide an opportunity for us," Brown said. "The pressure in the Houston market because of his presence will be so significant that we will get deals done."