Jim Robbins is blasting anew at the latest surge in the cost of cable sports networks. Bob Iger thinks Robbins's protest is laughable. Peter Chernin pretty much accuses Robbins of lying.
It was just another day in the war between operators and networks over the escalating cost of sports programming. The executives of Cox Communications, ESPN parent Walt Disney Co., and Fox Sports parent News Corp., respectively, delivered their barbs at Goldman Sachs' annual Communacopia media investor conference.
Cox President and CEO Robbins has been on a jihad over sports costs for months, most prominently in an attack on ESPN before the Senate Commerce Committee in May. His quest is to secure the right to put high-priced sports networks on a tier so that their costs will be incurred only by sports fans willing to pay up for ESPN and the local sports network, rather than by all basic subscribers as it is now. Ad-supported networks want to be on basic cable, available to all subscribers, to catch occasional grazers.
Robbins said Nielsen ratings show that "ESPN accounts for 4% of our viewers but 18% of our total programming costs. ESPN and Fox [Sports] together account for 8% of our viewers but 32% of our programming costs."
Disney President Iger later called Robbins's presentation "the only comedy relief this morning." He added that "there has been what I'll call tension in our negotiations with cable operators and it's been going on for years. But I think that tension belies the value that ESPN actually delivers not just to the consumer but to the cable operator."
Robbins's latest blast was set off by a recent Fox Sports proposal for renewing its deals for five regional sports networks on Cox systems that expire in December. Robbins says Fox recently laid out a plan that calls for an average 35% increase across systems serving 3.3 million.
That follows ESPN's 20% hike of its license fee to $2.65 monthly per subscriber in August.
Robbins said it is such hikes that drive up subscriber rates, which in turn anger regulators and legislators. "We are simply not going to be able to swallow those kinds of increases."
But Chernin, president of News Corp. and chairman of Fox Entertainment, contested Robbins's numbers. "That 35% rate increase that he's talking about is just not true," he said during Fox's presentation. He said it's limited to one Fox regional in Phoenix, one that just added rights to the NBA's Phoenix Suns, games that Cox had been separately sublicensing from telco and cable overbuilder Qwest.
"It's a 35% increase in Fox Sports alone, but it's actually a price decrease to Cox from what they were paying for the Suns on Qwest," Chernin said. "We're not looking to sort of kill our partners and our customers."
Cox fired back, saying that, in a written proposal, not only has Fox Sports sought a 35% hike across the board for 2004 but the increase in Phoenix would actually be 50%. Further, Cox said, News Corp. wants the operator to pay for two of its national channels, National Geographic Channel and extreme-sports net Fuel. Adding those would raise the 2004 cost by 47%, or 18% annualized across a five-year contract. Cox rejected a BROADCASTING & CABLE request for a copy of the proposal.
Robbins, Iger and Chernin agreed on one thing: that no one should be seeking government regulation. Even Robbins said he will seek rights for tiering only through private negotiations. But he'll continue to press the issue in Washington: "I want to inform them because, if we have to go dark, I want Congress to know why we're going dark."