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Kagan Analyst: Sports Costs Not Only Reason for Burgeoning Bills

Says retrans boosts are also taking toll on cable bottom line 1/28/2013 12:12:38 PM Eastern

On the same day that the Time Warner Cable/Dodgers deal
became official -- TWC reportedly is paying several hundred million dollars a
year for the rights to deliver dodgers games to its subs -- SNL Kagan analyst
Derek Baine argued that sports costs are not the only reason for rising cable
bills.

Baine predicts that by 2018, retrans payments cable ops pay
to carry local TV stations will have ballooned to almost $5 per sub per month,
or about what they pay now for ESPN, the poster-channel for escalating sports
rights costs.

Baine says that, in addition, operators have been adding
channels, which also adds to the cost. "The bottom line is that there are
a lot more moving pieces to the typical cable bill," he says.

The average cost of a sports channel over the last decade
has increased at a compound annual growth rate (CAGR)of 3.5%, he says, compared
to 2.9% for all channels. CAGR is actually smaller than the average over the
past five years, however, due to the launch of lower-priced nets like the NHL
Network.

But he says that there is no doubt costs are growing and
becoming a growing concern for cable operators. "Given the fact that we
think retrans payments will double from about $2 per sub in 2012 to more than
$4 per sub by 2016, there are tough times ahead," he says.

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