ESPN took a substantial step back in rate negotiations with Cox Communications Inc. and Charter Communications Inc., settling for 7% average rate increases, far less than the sports network had wanted.
The agreement resolves a particularly caustic fight with Cox, one waged in congressional hearings and ads to consumers in many markets. ESPN had been getting 20% annual increases, but was offering to limit that annual boost to 12%-16% in exchange for commitments to carry new services.
Instead, Cox said, it is paying an average of 7% over nine years, with a big step up in year one and much smaller ones in later years.
"This is a significant step in the right direction," said Cox president James Robbins.
"Everybody got what they wanted in this deal," ESPN Executive VP of Affiliate Sales Sean Bratches said. "We wanted ESPN, EPSN2 on expanded basic; Cox, they were looking to moderate their rate adjustment."
ESPN still gets a lot of money, around $3 per subscriber monthly in the first year and around $4 in the ninth year. But the network had sought increases that would have taken its rate to $8.16 in the ninth year.
ESPN does get more fees for other services, like ESPN2 and ESPN HD. Plus, Cox agreed to carry ESPN Deportes on systems with Spanish-language tiers.
But that doesn’t offset the loss of ESPN’s huge escalator. "The terms are far worse than originally expected by ESPN," said Fulcrum Capital media analyst Richard Greenfield.