TMC
2011-09-11 01:51:31 UTC
http://www.deadline.com/2011/09/pay-tv-companies-say-espn-fumbled-with-its-15b-nfl-deal/
The American Cable Association says ESPN paying 60% more for "Monday
Night Football" will end up being footed by cable users.
Pay TV Companies Say ESPN Fumbled With Its $15B NFL Deal
By DAVID LIEBERMAN, Executive Editor | Friday September 9, 2011 @
3:18pm EDT
ESPN is already starting to face a major backlash from pay TV
providers and some Wall Street analysts to yesterday’s $15B deal
extending its rights to Monday Night Football for eight years to 2021.
The agreement – which is at least 60% higher than the previous deal —
“will push the cost of pay-TV service into the stratosphere, making
the product less and less affordable during a time of severe economic
stress and high unemployment,” says Matthew Polka, CEO of the American
Cable Association, a trade group for small and mid-sized operators.
His main complaint is that ESPN requires distributors to offer the
channel in the most popular expanded basic package which means
“consumers with no interest in sports are required to subsidize the
sports fan.” ESPN and ESPN2 represent about 20% of a typical pay TV
provider’s wholesale programming costs even though the channels just
appeal to 2.5% of the viewers, Bernstein Research analyst Craig
Moffett says in a new report.
If you throw in other services, including regional channels, then
about $12.15 — more than half of the average monthly wholesale
programming payments — go for sports. Moffett figures that pay TV
subscribers would have to pay an additional 67 cents a month just to
cover ESPN’s additional new football costs. The price would rise to 78
cents if Dish Network drops the Disney-owned sports channel, something
that the satellite company’s chairman Charlie Ergen has threatened to
do. No wonder some analysts say Disney bit off more than it can chew.
Dave Novosel at newsletter Gimme Credit today reiterated his “sell”
recommendation for Disney’s bonds. Although the NFL “is valuable
programming even by sports standards,” he says, “let’s not forget that
Disney, and other media companies, often lose money on sports
programming.” In addition to the NFL, ESPN’s costs are rising for
Major League Baseball, the PAC-12 Conference, and Wimbledon tennis —
and from start up costs for the Longhorn Network (which specializes in
University of Texas games). That’s troublesome, Novosel says, because
ESPN’s ad revenues fell 1% after excluding unusual items in the
quarter that ended in June.
Moody’s Investors Service analyst Neil Begley is less troubled. He
says that the NFL “is must have programming” and will give ESPN ”more
leverage in its upcoming and ongoing negotiations with pay TV
distributors” as well as its deals with advertisers. Yesterday ESPN
chief George Bodenheimer predicted that the new NFL deal “will be
received very well by our distributors” calling the sports channel
“the most valuable service in cable for more than 30 years.”
The American Cable Association says ESPN paying 60% more for "Monday
Night Football" will end up being footed by cable users.
Pay TV Companies Say ESPN Fumbled With Its $15B NFL Deal
By DAVID LIEBERMAN, Executive Editor | Friday September 9, 2011 @
3:18pm EDT
ESPN is already starting to face a major backlash from pay TV
providers and some Wall Street analysts to yesterday’s $15B deal
extending its rights to Monday Night Football for eight years to 2021.
The agreement – which is at least 60% higher than the previous deal —
“will push the cost of pay-TV service into the stratosphere, making
the product less and less affordable during a time of severe economic
stress and high unemployment,” says Matthew Polka, CEO of the American
Cable Association, a trade group for small and mid-sized operators.
His main complaint is that ESPN requires distributors to offer the
channel in the most popular expanded basic package which means
“consumers with no interest in sports are required to subsidize the
sports fan.” ESPN and ESPN2 represent about 20% of a typical pay TV
provider’s wholesale programming costs even though the channels just
appeal to 2.5% of the viewers, Bernstein Research analyst Craig
Moffett says in a new report.
If you throw in other services, including regional channels, then
about $12.15 — more than half of the average monthly wholesale
programming payments — go for sports. Moffett figures that pay TV
subscribers would have to pay an additional 67 cents a month just to
cover ESPN’s additional new football costs. The price would rise to 78
cents if Dish Network drops the Disney-owned sports channel, something
that the satellite company’s chairman Charlie Ergen has threatened to
do. No wonder some analysts say Disney bit off more than it can chew.
Dave Novosel at newsletter Gimme Credit today reiterated his “sell”
recommendation for Disney’s bonds. Although the NFL “is valuable
programming even by sports standards,” he says, “let’s not forget that
Disney, and other media companies, often lose money on sports
programming.” In addition to the NFL, ESPN’s costs are rising for
Major League Baseball, the PAC-12 Conference, and Wimbledon tennis —
and from start up costs for the Longhorn Network (which specializes in
University of Texas games). That’s troublesome, Novosel says, because
ESPN’s ad revenues fell 1% after excluding unusual items in the
quarter that ended in June.
Moody’s Investors Service analyst Neil Begley is less troubled. He
says that the NFL “is must have programming” and will give ESPN ”more
leverage in its upcoming and ongoing negotiations with pay TV
distributors” as well as its deals with advertisers. Yesterday ESPN
chief George Bodenheimer predicted that the new NFL deal “will be
received very well by our distributors” calling the sports channel
“the most valuable service in cable for more than 30 years.”