TW Reduces YES to Tiers
By John M. Higgins and Allison Romano -- Broadcasting & Cable, 6/15/2003 8:00:00 PM
Another battle is erupting over the red-hot issue of the high cost of cable sports networks. Time Warner Cable has declared that it will begin selling the pricey YES Network on an à la carte basis, prompting the Yankees network to threaten to sue.
Time Warner said last week it plans to offer the regional sports channel just like pay networks HBO or Showtime, letting subscribers decide whether they want to pay for it.
The net accuses Time Warner of breaching its contract. In a statement, YES said, "We will take the necessary action to protect our rights and keep the YES Network and the Yankees available to Time Warner customers without any additional cost."
But like other cable operators, Time Warner is becoming increasingly alarmed at the high cost of sports networks and is eager to create a sports tier, so that non-sports fans aren't forced to pay for expensive sports nets they don't want.
Time Warner's move comes on the heels of YES's agreement to finally get Cablevision Systems to carry the network. YES allowed Cablevision to carry YES on a premium tier or sell it à la carte.
That's unlike Time Warner and other MSOs, which had earlier agreed to carry YES to virtually their entire metro-New York customer base, absorbing the $2-per-subscriber monthly fee for most of their systems. But Time Warner executives contend that the "most favored nation" clause in their YES affiliation agreement allows them to sell the sports networks.
Time Warner wants the same flexibility YES is allowing Cablevision.
The move promises to substantially reduce the network's license-fee revenue and almost certainly viewership and ad sales. Among the reasons ad-supported networks hate to be sold à la carte is that they lose the chance of casual viewers' grazing in.
Beginning July 29, New York City and New Jersey subscribers Time Warner Cable's roughly 75-channel standard service can cancel YES and trim their bills by $1 monthly. New customers will have to affirmatively ask for YES when they sign up.
High-end Time Warner subscribers will continue to get YES as part of their bundled packages. Time Warner customers in upstate New York are not affected.
Time Warner Cable's offer is likely face scrutiny as a "negative option," under which existing subscribers have to call to cancel the service. Negative options are often attacked by state regulators.
Time Warner President Tom Baxter wouldn't estimate how many of the 1.2 million metro-New York subscribers will receive the service. But Cablevision's experience isn't good for YES.
In May, Cablevision said just 9%, or 170,000, of 1.9 million basic subscribers opted to buy YES à la carte. Another 1.1 million get it as part of some package.
Under their carriage deal, YES has asserted that Cablevision would indemnify the network for lost license fees over most-favored-nation claims from other operators, including Time Warner. But that would only apply through next spring, when the current YES/Cablevision pact expires.
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