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January 8, 2008

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NFL Network Can't Beat Cable Industry

The Business of Sport

By EVAN WEINER
December 6, 2007

A D V E R T I S E M E N T
A D V E R T I S E M E N T

It must be galling to the money machine that is the National Football League that it has met an opponent that keeps stopping it from gaining any yardage in its quest to get the NFL Network carried on cabble operators such as Comcast, Time Warner, and Cablevision. The NFL generally gets its way because, well, it is the NFL, and people fawn all over the league. But this time, it has run into a tough opponent: the cable TV industry itself.

Cable TV's multiple system operators have balked at the price of the NFL Network, believed to be somewhere around $.70 per subscriber per month. The NFL is charging this per subscriber for a network that features eight regular season games on Thursday and Saturday nights, along with a slate of pre-season games and some college football contests. The rest of the programming is filler, featuring NFL-related shows. The NFL feels the network should be placed on a basic expanded tier where it would be available to virtually every cable customer, and every cable customer would pay for the channel whether they watched the channel or not. The league would earn big bucks with this system. But the cable operators want to put the channel on a digital sports pay tier, which would be far less lucrative for the NFL. The multiple system operators in the Midwest have expressed the same sentiment about the Big Ten Network, which would feature a number of games played by Big Ten schools in a variety of sports.

There is a common denominator in both disputes. Comcast, the nation's largest multiple system operator, thought it had a deal to put the eight regular season game package that is presently on the NFL Network on its Outdoor Life Network in 2005. But the NFL opted to keep the games for its NFL Network. And Comcast was offered a partnership in the Big Ten Network, but the deal fell through. Comcast officials are also unhappy that the NFL sold its outof-market Sunday package to DirecTV in an exclusive deal, and has locked cable companies out of that franchise.

The cable companies are playing hardball with the NFL. The NFL has decided that it's time to go to state legislatures and hope that lawmakers can put the screws to the multiple system operators and get the NFL Network on the basic expanded tier. The league is also urging local subscribers to drop their cable operators and switch to DirecTV, so they can get the NFL Network.

In Ohio, Rep. Louis Blessing, a Republican from the Cincinnati area, introduced legislation in Ohio's House of Representatives, calling for a new law that would "require cable operators to participate in arbitration regarding disputes with providers of competing video programming."

Mr. Blessing wants both the NFL Network and the Big Ten Network on basic expanded cable, ignoring the fact that basic expanded cable subscribers, who might not want the channels, will see rate hikes anyway because of the additions. The Blessing bill had 21 co-sponsors. The cable operators were not impressed. In a bipartisan turn, Democratic legislators in North Carolina and Indiana are preparing to hear comments or offer legislation, respectively, on the issue. But it doesn't seem like cable operators are particularly concerned.

The NFL was also seeking relief from the federal government in the ongoing dispute, hoping that the chairman of the FCC, Kevin Martin, would be able to deliver the league a big win in Martin's general plan to revamp cable TV rules. But on November 28, the NFL Network was handed a major defeat when Martin did not receive enough votes from the five-member commission, and was forced to drop proposed rules that

could have forced Comcast and Time Warner, as a result of compulsory arbitration, to carry the Hallmark Channel and the NFL Network, and pay those networks license fees.

Martin did not have the support of a key Republican Senator, Pennsylvania's Arlen Specter, who sent a letter to Martin on November 20 stating his opposition to bailing out the NFL. Specter said in the letter, "The only possible outcome would be higher costs to consumers."

The commissioner of the NFL, Roger Goodell, may have to look at his playbook and figure out his next move, as Martin was sacked on November 28. Goodell, two days prior to the NFL Network's kickoff game on Thanksgiving, told reporters in a conference call that the league might consider selling an equity share in the network to cable operators, much in the same way that Major League Baseball did with its own cable TV channel. The MLB Channel will launch in 2009 and should be available in 47 million cable and satellite homes, thanks to equity deals with Time Warner Cable, DirecTV, Cox, and Comcast. MLB will own 66.67% of the network. The NFL Network is available in 35 million homes, which is not where the league feels its product should be. The NFL's goal was 50 million homes by 2007. The big boys on basic cable channels such as ESPN, CNN, FOX News Channel, and MSNBC have somewhere between 95 and 97 million subscribers.

The whole question of sports carriage and subscriber choice on cable TV may come to a head in 2008 (or when a new President takes office in January 2009). There are groups that are pressuring both the FCC and Congress to change cable TV rules that would allow subscribers to pick and choose what cable channels they want. Martin had been pushing for the change for about a year, but last April, he said he needs Congressional authorization to force cable operators to offer cable networks on an à la carte basis.

Proponents of à la carte cable channel choices say they should not have to pay for channels they don't watch. Some groups also want more control of what product comes into their homes, and the ability to block out what they consider non-family channels, such as MTV or the E! Entertainment Network. Opponents of à la carte legislation complain that consumers would have to pay more for channels they want, and that many channels would go broke because there would not be enough subscribers who would sign up for programming. But it might behoove these opponents to take note of the NFL Network's early performance: Network officials announced that the November 29th Green Bay–Dallas match up was the highest-rated cable show since a free trade debate took place on CNN's Larry King Live by then-Vice President Al Gore and Ross Perot in November 1993. The game drew 10.1 million viewers and a 14.6 rating, which was rather impressive, considering the limited cable penetration the network has.

Sports operators get huge sums of money from cable TV, because subscribers' fees are fixed under the current basic expanded rules. ESPN is guaranteed at least $250 million a month from subscriber fees, and that would plummet drastically under an à la carte plan. The NFL isn't asking for ESPN money yet, as the league would gladly take $35 million a month from subscribers for eight games and deal with à la carte another day. But it's not getting help from Comcast or other cable operators in its quest, and the FCC has not delivered.

The NFL usually wins, but this time they have been beaten in every aspect of the game against the cable operators, and are in a fourth and long situation with the clock running out on the 2007 NFL Network season. It must be a stunning situation for Goodell and the 32 owners who are used to nothing but dominating the opposition.

evanjweiner@yahoo.com


Reader comments on this article

TitleByDate

Expectations were set long ago-all games are carried [71 words]

billf 

Dec 6, 2007 21:03

Why should I pay [273 words]

Non-sports fan 

Dec 6, 2007 15:03

  re: why should I pay [25 words]

nflrulescableblows 

Dec 6, 2007 17:44

  why should [45 words]

Shaun Corbett 

Dec 27, 2007 19:22

keep it to themselves [232 words]

Chris Tittle 

Dec 6, 2007 14:26

  Bye Bye N.F.L. [135 words]

William H. Barham 

Dec 6, 2007 23:41

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