ESPN defended its move to hike cable operators' rates by as much as 20%, a move that has angered operators.
Unlike most cable networks, ESPN has built into most of its affiliation contracts an aggressive yearly escalator originally conceived to make it easier for the network to bid for pro sports that had been broadcasters' exclusive province. But now that the NFL and NBA are cable staples, operators are less excited about the sports rights and more agitated about paying an additional 20 cents to 25 cents per subscriber monthly.
Charter Communications' Jerry Kent expressed frustration: "Programming-cost increases are probably one of the top things I worry about," he said.
ESPN Executive Vice President Ed Durso would not confirm the size of the increase but said it's justified. "We feel it recognizes the value of what we bring." Although ESPN's ratings are currently tumbling, it has long been top-rated, particularly among men. ESPN and other sports nets attract cable subscribers.
The new rate varies among MSOs. ESPN had been averaging about $1.20 per subscriber. But MSOs can get a better deal or smaller increases by committing to wide carriage and prominent channel placement of other Walt Disney Co. co-owned services, such as ESPN Classic or SoapNet.
Kent suggested that the government could help by allowing cable operators to offer expensive sports programming on an à la carte basis. Expensive channels like ESPN oppose being carried as a premium channel, like HBO, because they get more exposure and can charge higher advertising rates if they are carried in operators' basic programming tiers.
And, like other pay networks, ESPN would increase its rate to several dollars per month per subscriber.