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View Full Version : Cox Communications and ESPN Contract Fight


MacNut
Jan 31, 2004, 12:44 AM
If your wondering ESPN is owned by Disney so this could be another blow for Eisner

Like all cable companies, Cox Communications pays the owners of cable networks for the rights to deliver those channels to its cable subscribers. For instance, Cox signs agreements with Viacom for the rights to distribute the many Viacom-owned networks like MTV and Nickelodeon; with Discovery Communications to distribute channels including Discovery and TLC; and with numerous other companies that own anywhere from one to many cable channels. Thus, cable companies are retail distributors of a wholesale product. Just as a dairy's price increases can cause supermarkets to raise the retail price of milk, the rising costs of cable networks lead to an increased retail price of cable TV.

For years, Cox has worked diligently to minimize the impact of these cost increases to its customers. For example, while cable networks increased the prices they charge Cox an average of 12% for 2003, Cox raised its prices to customers an average of about 5%. Still, the company feels strongly that cable continues to be a good value for consumers. The standard-cable package of about 80 cable and broadcast channels costs about $40 a month and delivers great variety and entertainment value. Cox is committed to maintaining that value.

However, major sports networks' unrestrained price increases threaten to diminish the value of cable to consumers. The price of sports network ESPN, for example, is rising dramatically and disproportionately to the cost of all other programming. In fact, the U.S. General Accounting Office (GAO) cited the rising cost of sports networks in a recent report on issues related to cable TV prices. The GAO reported that in the past three years, sports networks raised their prices an average of 59%, more than double the 26% increase for non-sports networks. These alarming increases place tremendous pressure on Cox's ability to keep its prices competitive and reasonable.

To focus on ESPN for a moment, Cox's multi-year contracts with ESPN will expire on March 31, 2004. In early negotiations, Cox is emphatic that ESPN's exorbitant increases are most damaging to customers sports fans and non-sports fans, alike. Cox fully agrees that sports networks are valuable to Cox and its customers, just as the many other genres of cable programming are. However, the alarming year-over-year increases proposed by ESPN are out of line with the market and are unfair to Cox's customers who are the ones who end up paying the price. Cox maintains that ESPN must moderate their increases to reasonable levels.