Time Warner Cable may be cursing the recent surge, called "Lin-sanity," that's made the Carmelo Anthony and Amar'e Stoudemire-less Knicks a must see national phenomenon. In a matter of days, Lin turned a missable Knicks season into a must see sports drama.
In early January, after months of heated talks on pricing that even made it publicly to television ads, Madison Square Garden and Time Warner Cable ended negotiations that would bring MSG and MSG+ to 12 million-plus Time Warner subscribers for years to come. With more and more fans interested in seeing whether Lin will turn into a bona fide star or peter out, Time Warner may need to relent to a higher priced agreement.
"It makes it harder for Time Warner Cable to get the price it wants for carriage of MSG," says Evercore Partners analyst Bryan Kraft of the impact of Lin-sanity on the contract dispute. The biggest fear may be that Jeremy Lin is broadening interest in the Knicks and not only to Time Warner Cable's 2 million-plus New York area subscribers.
With a broader interest outside of New York basketball die hards, Time Warner may be cornered. "There were a certain number of Time Warner subscribers who watch MSG. Now with the popularity of Jeremy Lin, that number of customers is increasing," adds Kraft. Still, he says that five games of NBA play by 23-year old Jeremy Lin isn't a backbreaker for the company.But the impact may already be felt. Initially, one might have given Time Warner the edge in the contract war because of its size relative to the long-suffering Knick and Ranger broadcasting rights that MSG offers. However, the Lin-fueled Knicks may make it easy for MSG to forget its Time Warner viewers. "their ratings are higher in absolute terms even without Time Warner Cable," says Maxim Group analyst John Tinker. "Heaven forbid if Linsanity keeps going," he adds. The pricing ball may be back in MSG's court. "MSG wants an escalation over the $4.3 per sub rate charged last year. We think a deal gets done at $5 to $5.40 based on how much ad inventory goes to TWC and if TWC carries the FUSE network," says Albert Fried analyst Richard Tullo. MSG will also benefit from increased TV ratings, which will boost its MSG Media division sales. Meanwhile a change in the NBA's merchandising rights may benefit Madison Square Garden shares. "We think eventually corporate Jersey sponsorship must happen in the NBA, so Linsanity potentially helps the KNICK court high profile sponsors just as Wayne Rooney helps Manchester United earn $125 million annually in the EPL," says Tullo. MSG shares are up nearly 10% in the last five trading days near record highs of $33.18 a share. Time Warner Cable shares have risen moderately in that time span, rising under 1% in Monday trading to $75.98.
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