Cox Communications (COX) continues its one-company crusade against high sports programming costs.
The Atlanta-based cable operator issued two reports last week as part of its public effort to shift the cost of rising cable rates to the parties it believes are to blame: sports programming channels, chiefly
Fox Entertainment Group's
Fox Sports Net.
But though Cox has labored to whip the issue into a frenzy, other high-profile cable TV operators have failed to join Cox's finger-pointing crusade -- perhaps because they prefer to negotiate these issues in private, or perhaps because their loyalties are complicated by their own investments in sports programming.
In any case, the payoff of Cox's efforts isn't yet known. The company may indeed end up with lower rates than it might have reached without the public exercise, or it may be simply laying the groundwork for deflecting consumer backlash if, in the course or failure of negotiations, it pulls sports channels from its cable systems.
Cox's shares closed at $34.28 Friday, less than 2% off the operator's 52-week high.
Tiers on My Pillow
Last week's reports, funded by Cox and published on a Web site it has entitled
Make Them Play Fair, were written by William P. Rogerson, a professor of economics at Northwestern University.
The title of study No. 1, dated last Monday, "Cable Program Tiering: A Decision Best and Properly Made by Cable System Operators, Not Government Regulators," explicitly states one of Cox's positions in the dispute with sports programmers: To control costs, operators should be free to offer sports programming on an optional basis. With sports channels understood to be the most expensive basic channels for cable operators to carry, Cox and others say that putting sports on optional tiers of service will lower prices for cable subscribers who are not interested in sports.
That, in fact, was the same argument put forward by New York area cable-TV operator
, which dropped Yankees games from its systems in a dispute over programming costs, then temporarily agreed to include them on an optional tier.
On the other side, programmers say that dividing up basic programming into optional tiers rather than selling them in packages will ultimately prove to be detrimental to the cable TV experience. With viewers cherry-picking channels, the smaller specialized channels that distinguish cable from broadcast TV will lose viewership, become economically unviable, and fail.
In his Cox-sponsored study, Rogerson argues that the government should continue its "sensible" policy of not prohibiting operators from putting "certain costly sports programming such as ESPN" on an optional tier, assuming that's what an operator can negotiate with a programmer.
The Road Less Traveled
In study No. 2, issued Tuesday, Rogerson disputes an earlier ESPN-sponsored study concluding that 20% of cost increases for the cable industry from 1999 to 2002 were due to programming, the implication being that programming costs were not the villain that Cox would make them out to be.
Rogerson argues that it is appropriate to calculate how much basic cable TV subscription prices would have had to rise in order to recover programming cost increases. Rogerson calculates that 42% of the increase in subscription prices was necessary to cover the increased cost of programming.
ESPN issued a statement Friday calling Rogerson's study "economically meaningless and misleading," adding, "Even by its own calculations, almost 60% of cable price increases can be attributed to nonprogramming costs."
If Cox is hoping for a groundswell of support on the sports programming issue, it's not getting it from fellow major cable operators.
For example, asked about sports programming costs on
third-quarter conference call, Comcast President Brian Roberts
avoided taking any sides. Comcast itself is majority owner of Comcast SportsNet and other programming channels.
Cox CEO Jim Robbins himself said late last month that
Cox was making progress in negotiations with one of the two major sports programmers, though he wouldn't say which one. Judging from last week's rhetoric, it probably wasn't ESPN.