NEW YORK (TheStreet) -- Enjoy watching the Super Bowl for free, because it's about to become a costly bargaining chip.Though CBS ( CBS - Get Report) is hosting the big game this year, News Corp.'s ( NWS - Get Report) recent victory in a fee dispute with Time Warner Cable ( TWC) has opened the field for other broadcast networks to make similar demands. News Corp.'s Fox reportedly sought $1 from each Time Warner customer to access its hit shows, including American Idol and The Simpsons. While Fox's primetime lineup provided leverage, its contracts with the National Football League and Major League Baseball might set the negotiating template for other major sporting events this year. "Sports are a large portion of cable cost increases, but they're one of the only ways for advertisers to tap into the male demographic," says David Joyce, an analyst with Miller Tabak. "There are a lot of advertisers that don't have anywhere else on TV to spend but on these kinds of outlets, which are priciest to the consumer." Sports are still the biggest cog in cable's cost structure. Walt Disney's ( DIS - Get Report) ESPN pulls in $4.10 a month per cable subscriber, almost double the $2.37 that No. 2 Fox Sports Net charges, according to figures from SNL Kagan. Four sports channels -- ESPN, FOX, NFL Network and ESPN 2 -- are among the 10 most-expensive cable channels. Without them, subscribers would save about $8 a month. None of those networks pull in Super Bowl-level ratings or advertising revenue. Though the NFL championship hasn't drawn more than a 70% of viewers since 1985, it also hasn't dipped below 60% since 1966, when it was broadcast on two channels that together would have posted a 79% share, according to Nielsen.
While the cost of a Super Bowl commercial has fallen to $2.5 million to $2.8 million from last year's record $3 million, it hasn't slipped below $2 million since 1999. The networks, which rotate Super Bowl broadcast duties, will likely use those facts to wring more money from the cable industry. "Major media companies use their control of regional and national sports networks to charge small cable providers unreasonable rates for access to live and same-day sporting events, and require small cable operators to pay these fees for every one of their customers," says American Cable Association Chief Executive Matt Polka in a statement to TheStreet. "Media giants also leverage their control of 'must have' sports programming to force distributors to give wide distribution of their affiliated channels, frustrating consumers who must pay for programming they have no desire to watch." While ad revenue has been driving broadcasters' fee demands -- despite a 10% decline in the first half of 2009, according to TNS Media Intelligence -- so have fans. In 2003, when Cablevision ( CVC) refused to add the New York Yankees' YES regional sports network to its basic cable lineup, fan outcry led Cablevision to concede. Around the same time, Cox Communications' threat to pull ESPN channels from its basic package during a fee dispute led to an ESPN PR campaign that caused Cox to cave and ESPN to dial back fee increases, which still boosted ESPN's average price from $2.64 to $4.10 since 2004. Other niche markets are following sports' lead. Cablevision foodies were furious after Scripps Networks ( SNI) pulled its Food Network and HGTV from the service after being denied a fee increase. Analysts say Discovery Communications ( DISCA - Get Report) is making noise about increasing fees when carrier agreements for its Oprah Winfrey Network, TLC, Hasbro ( HAS) channel and other holdings end in 2012.
When these channels come collecting, and the broadcasters threaten to pull the NBA Finals unless they get a 50-cent bump in their monthly fee, cable providers who can't sell consumers anything beyond an inflationary increase will be making cuts at the low end. Lifetime Real Women, Nick Too and Blackbelt TV -- like CNNfn and MOJO before them -- may get drowned out by the roar of the crowd. "When they add these new sports channels, they're eating out of their own cash flow because they can't pass it on to the consumer," says SNL Kagan analyst Derek Baine. "You're going to see more negligible networks on the air now being thrown off when they come up for renewal." -- Reported by Jason Notte in Boston.