The perennial dispute between cable TV system operators and programming providers erupted into a minor skirmish Tuesday, as cable operator
executive of understating the rate hikes his company seeks.
Cox CEO Jim Robbins says News Corp. operating chief Peter Chernin is seeking far greater rate hikes for the Fox Sports programming network than Chernin let on in public comments Tuesday.
Robbins also complained about price increases at
ESPN sports channel, saying that ESPN and Fox Sports together account for 32% of Cox's expanded basic programming costs, but account for only 8% of corresponding viewing.
The executive's comments spotlight the never-ending conflict between cable system operators and the programmers who -- for a fee -- supply the channels that operators distribute to individual subscribers. Cable operators invariably contend that programmers charge too much for programming, especially sports channels, while programmers counter that these rates aren't out of line, considering the value that home viewers ascribe to these channels and the revenue that operators can reap by selling advertising that runs on these channels.
The debate surrounding sports channels has only intensified in recent years, as sports teams and leagues have sought ever-higher fees for rights to telecast sporting events.
Tuesday's dispute began when Robbins, an outspoken critic of sports programming costs, said at a Goldman Sachs conference that the News Corp.-controlled Fox Sports had proposed an overall 35% rate hike in 2004 for Cox's carriage of Fox's regional sports networks. Cox has 6.3 million basic cable subscribers, about 3.3 million of which are in systems affected by any Fox Sports agreement.
In an report from the Goldman conference,
Dow Jones Newswires
quoted Chernin as saying Robbins mischaracterized the requested 35% hike. "It's just not true," Dow Jones quoted Chernin as saying. "That's only
for the city of Phoenix."
But in a press release issued Tuesday evening, Cox calls Chernin's statement incorrect.
"In actuality, Fox's own written proposal calls for a 50% increase in Phoenix," says Cox. "Further, in some affected markets, the increase for 2004 is far higher -- up to 181% in one Cox market representing about 200,000 customers."
A News Corp. spokesman said Chernin was on a plane and unavailable to comment.
To be sure, it doesn't appear that the 35% rate hike cited by Cox would be an annual event. Fox Sports' proposal, says Cox, is a five-year contract with an average annual price increase of 13%.
But, adds Cox, taking into account the cost of two additional networks that Fox would require Cox to carry as part of the agreement, the increase would amount to 47% for 2004 and an average of 18% a year over the five-year contract.
Cox says its contracts with Fox and ESPN come up for renewal next year and said it was appropriate for it to be complaining about proposed rate increases in public -- though others might regard these numbers as simply starting points for private negotiation.
"The reason is simple: timing and fairness," says Cox in its statement. "With our contracts for ESPN and Fox Sports expiring within the next six months, we must take a stand now to oppose contracts that call for large annual increases and diminish the price value of cable for our customers."