November 22, 2014

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Big Ten, cable companies clash over new network

Nothing captures the essence of a classic sports conflict in the Big Ten quite like Ohio State and Michigan. But the most intriguing fight at the moment has nothing to do with the Big House in Ann Arbor or with the Buckeyes or Wolverines. Rather, it involves the conference and an ongoing battle with cable operators.
The Big Ten Network is scheduled to go on the air Thursday with a lineup zeroed in on its legion of rabid fans and alumni across the country.
The sticking point is the price. BTN is demanding cable operators to place its programming on the standard basic lineup, which, in Ohio, includes ESPN, ESPN2 and FSN Ohio — sports channels that don’t require a special cable box. Cable operators have balked, however, suggesting BTN’s insistence would result in an unnecessary $1.10 charge to all customers inside the eight Big Ten states at a time when cable bills continue to inch upward.
Cable operators believe BTN belongs on its digital sports tier — which reaches a far smaller audience — and would require individual customers to pay an extra monthly fee of $5.95.
BTN will air 380 sporting events, 160 of which would be football and men’s basketball games. With the start of football just days away, BTN’s biggest draw is the airing of three Ohio State football games that is otherwise not available to fans: non-conference matchups against Youngstown on Sept. 1 and Akron on Sept. 8, along with one against an undetermined Big Ten opponent.
Conference executives recently signed a 10-year, $1 billion contract with ABC and ESPN but are utilizing the dozens of games left beyond what major networks plan to air. The Big Ten partnered with Fox Cable Networks to build a downtown Chicago headquarters and obtained broadcast rights from their member schools.
So far, the most difficult transition BTN has faced is persuading cable systems throughout the Midwest — led by heavyweights Comcast, Time Warner, Cox and Mediacom — to carry all of its programming.
Although the network has agreed to terms with 75 cable companies on the national level, it has signed with only “several” smaller providers in Ohio, according to BTN’s media relations department. DirecTV is the largest signal provider that offers the network’s content. DirecTV’s partial owner, News Corp., is the parent company of Fox Cable Networks, which owns a 49 percent stake in the Big Ten Network.
Northeast Ohio is primarily serviced by Time Warner, DirectTV, Cox Cable Communications and AT&T U-verse. Time Warner and Cox, two of the largest cable operators in the country, have not budged off their insistence that BTN lower its demands.
Big Ten Network President Mark Silverman said last Friday that talks with Time Warner, which has approximately one million customers in its Northeast Ohio division and more than two million statewide, are ongoing but that no agreement is imminent.
“We don’t feel that (BTN’s) offer is fair to all of our customers,” said Gina Petredis, director of government and media relations for Time Warner Cable of Northeast Ohio. “This is not good value for money spent. We’re going to hold that line. And the reason we’re still at the table is because we know there are some customers that would like to see the Big Ten Network. So we’re going to work out the best deal possible for all of our customers.”
In the cable industry, networks profit not from advertising, but from charging each cable system a fee based on subscribers. The Big Ten stands to see a significant windfall should its $1.10 charge be accepted by operators. With an estimated 18 million cable subscribers in Big Ten country alone, the potential revenue could far exceed $220 million a year, according to industry analysts.
Depending on the Big Ten Network’s success or failure, it could have a ripple effect across the college sports world. Several other conference powerhouses are paying close attention and are believed to be mulling similar enterprises, including the Pacific 10, Atlantic Coast Conference and Southeastern Conference.
The dispute over the Big Ten Network is typical of the ongoing tensions between cable operators and sports networks. Cable operators have found the cost of extra sports channels to be prohibitive as a result of acquiring fees inflated by soaring league revenues and professional player salaries.
“Cable operators hate all those sports networks that are charging huge licensing fees,” said Derek Baine, an analyst with SNL Kagan. “It’s eating up their margins.”
But according to Elizabeth Conlisk, BTN’s vice president of communications, cable operators haven’t painted an entirely accurate picture. For instance, Conlisk said the customer fee, which has long been reported at $1.10, has always been used a negotiating starting point, never as an iron clad number.
“There has been a direct correlation that whatever we charge the cable operator means that they are then required to pass that cost onto consumers,” Conlisk said. “But programming only takes up about 30 percent of your average cable bill. So, really, it’s unfairly blamed for increases in cable costs.”
Time Warner says the extra costs it adds onto its programming can’t help but be felt by its customers.
“Programming is a very large portion of our expenses and sports programming is a large portion of our programming expenses,” Petredis aid. “And we understand how much people love their sports. But we’ve got to try to walk the delicate balance between providing the sports programming that people want, but providing it at a price that’s fair to them and fair to all of our customers. It’s a delicate balance.”
And with Week 1 of the college football schedule drawing closer into view, more fireworks are bound to ignite.
As Petredis said: “Sports fans are passionate.”
Contact Pete Alpern at 329-7137 or palpern@chroniclet.com.