Monday, November 10, 2008

Like the Seasons...Time Warner vs The NFL




OK here we go, I have my soap box, I have many websites to back up my assertions...and I have my mental state of health. We are good to go. The subject, the NFL and it's NFL network vs Time Warner Cable. I will forewarn you, I may, from time to time, stray into other media territory, but I will try to stay on point..here goes.

For the 2nd time in less than 1 calendar year, a very important NFL game will be unavailable to millions and millions of households across the country. Once again, for us in the northeast, the New England Patriots are involved. Thursdays showdown between the New England Patriots and the New York Jets is surprisingly (Tom Brady's injury, Brett Favre and his NY arrival) a battle for 1st place in the AFC East and is scheduled to be broadcast on the NFL's own NFL Network. Approximately 70% of cable households in the country (pre-Comcast arbitration ruling) do not have The NFL Network. Here are each sides position on this matter.

The NFL believes that this programming is their NFL only version of ESPN. The NFL Network offers in depth game coverage, news programs, replays of all time great games, NFL Films library, and unprecedented access to coaches, locker rooms and game coverage. Starting last season, they broadcast a few special games a season, on Thursday and Saturday nights, in an attempt to lengthen the NFL week. The NFL believes their network should be broadcast on cables basic digital tier, with no extra fees involved. In a Peter King SI.com article last year, Dallas Cowboys owner Jerry Jones laid out some of the NFL's points.

"We offer the cable company several minutes of advertising inventory on NFL Network. Every hour of every day they receive commercial time where they sell the ads and keep all the revenue. And in an effort to be better partners, we even set aside extra commercial inventory during our highly rated NFL games. Each cable operator gets 18 30-second ads during these games and they keep all the revenue from those too. Why do they have to charge the fans? Ask the fans this: Would you trade in three shopping channels, the Versus Network and Turner Classic Movies for the opportunity to have one channel in this country dedicated to football year-round? We offer a tremendous array of football-related content, the most popular programming in the country, and we do it for the cost to the cable operator of less than one movie ticket a year per subscriber. Would you rather go see one movie in the theater for two hours or have 24/7 year-round access to football?'' 1

According to the same Peter King article here is the breakdown of costs for Time Warner with regards to other programming offered.

COST PER SUBSCRIBER HOUSEHOLD (per month)1

Leading non-sports channels
TNT: 91 cents
Disney Channel: 83 cents
USA Network: 51 cents
CNN: 46 cents
TBS: 44 cents
Nickelodeon: 43 cents
FX: 36 cents

Leading sports channels
ESPN: $3.26
Fox Sports Net: $1.92
NFL Network: 80 cents
Fox College Sports: 63 cents
NHL Network: 51 cents
ESPN2: 46 cents
NBA TV: 36 cents

Now Time Warner has a very different spin on the situation. Time Warner's position is that The NFL Network offers niche programming that should be offered to only those who want it. According to Time Warner's Director of Public Affairs in Central Texas, Roger Heaney, "the NFL Network has ignored reasonable terms to date, including insisting on a $750 million price tag to air eight regular season games that would otherwise have been free"2 or this from Time Warner Nebraska site


The NFL is Out of Control

  • The NFL pulled 8 games that were available for free last year and now wants to charge all of our customers for these out-of-market games.
  • The NFL Network’s price-value proposition is not balanced. They want to charge every customer an outrageously high price for eight, out-of-market games.
  • Under the direction of the National Football League’s executives the cost to watch professional football as escalated out of control.
  • TV rights are up 10,000% since 1970 (Washington Post, 4/24/05).
  • The NFL is receiving $3.7B annually until 2011 for the most recent television rights contracts (Washington Post, 4/24/05).
  • But that’s not enough. The NFL is asking for a 350% increase for continued carriage of its Network.
  • Estimates for the NFL Network’s 8 out-of-market game package are $400M alone (Forbes, 1/30/06).
  • The league is demanding $100M from Time Warner Cable and yet we only operate 18% of the cable universe.
  • And for a league that tries to distance itself from unsavory activity like gambling, they have no problem stripping 8 games from football fans and scalping them back in order to make a 350% profit.
  • This just builds on the NFL’s legacy of greed. And recent reports seem to point to no end in sight as several of the League’s top executives are vying to become the next Commissioner.
  • Some understand the issue. NBA-TV is carried on the Time Warner Cable sports package. The NBA runs a tight ship and has done well for the owners and by the fans; and sees the value in making NBA-TV available on Time Warner Cable’s sports tier. NBA-TV looks a lot like the NFL Network, but last year carried 96 live regular season games, that’s 88 more than the 8 out-of-market games on the NFL Network. "3

Well here comes the opinion part of all of this, while there is plenty of blame to be thrown around, what the bottom line is that 2 multi-billion dollar companies can't figure out who will get a bigger piece of the pie. As usual, in squabbles like this, the consumer, aka Football Fans, lose every single time. The NFL and it's approach seems much more reasonable to me than does Time Warner's reasons. Time Warner is in this biz to make money, I have no issue with that, but when the NFL Network is giving you plenty of ad space to sell, which is supposed to be a LARGE part of your revenue, go out and sell it. Don't make money on the backs of your subscribers. Time Warner can put The NFL Network on their regular tier tomorrow and make a profit from ad sales, they just don't want to. They want to raise the price of the sports tier to accommodate the NFL Network and then some (c'mon you think they won't make a huge profit from this angle) and THEN they can sell specialized, higher priced ad space and make even more money on top of that. The sports fan will get it from both ends of the stick. It is quite clear that Time Warner believes that The NFL Network doesn't have programming worthy of watching, they are making a content judgement. They are attempting to control what it is you watch. Time Warner would rather you subsidize the Lifetime Network with your basic cable subscription, rather than pay for worthy programming for NFL fans. Do Lifetime Network watchers spend billions and billions of dollars a year on tickets, media and merchandise...I think we all know the answer to this one. Now let's look at Time Warner's other major reason for not making this move, payback. The NFL will not allow cable companies to carry the ever present and ever expensive NFL Sunday Ticket. I bet Time Warner thinks that is programming worthy of offering...oh wait...they do. Time Warner president Glenn Britt said at a hearing on Capitol Hill in March of this year that (the NFL is) "especially disingenuous" in appealing for the government "to compel distributors to carry one of their services, NFL Network, on broadly distributed tiers while simultaneously defending its right to limit distribution of its more appealing service -- the NFL Sunday Ticket package -- to a single distributor, DirecTV." Do not discount this as being a major reason Time Warner will not aqueous to the NFL and its demands.

During the New England Patriots run to history last season, things heated up between Time Warner and the NFL, but as usual, nothing came of it. The NFL offered Time Warner binding arbitration. Time Warner President Glenn Britt once again "Over the years we've been able to successfully reach agreements with hundreds of programming networks without the use of arbitration," Britt wrote. "We continue to believe that the best way to achieve results is to privately seek a resolution and not attempt to negotiate through the press or elected officials."4

Seems like Time Warner doesn't practice what it preaches.

Bottom line is Time Warner wants to charge the consumer for something they should work a little extra hard for...profits. The Cable TV industry is just as, if not more, out of control than sports teams and their spending. Time Warner had made no efforts to improve consumer technology over the last 4 years. Look for yourself, the High Definition box you have in your home today is the exact same model they released 5 years ago. No networking capabilities, no USB add-ons, and frankly little HDMI support. Scientific Atlanta, which is now Cisco, contracts with Time Warner for hardware, introduced a new HD cable set top box in 2006, and hasn't had even a nibble from Time Warner to purchase new boxes that would offer new services that they would have to work for. Tivo had upgraded 4 times and DirecTV has 3 new boxes in the same time span. Is that the definition of a company that is working for the consumer and their needs? How about Time Warner's new Road Runner Turbo5 pricing? They offer you speeds up to 15mbps...not the measly 5mbps you get now...over the same lines you have already paid for, with little infrastructure improvement for the low low price of $14.99 extra a month. Yeah, that's not out of control.

The NFL Network situation is a microcosm of what is wrong with the entertainment business in the USA today. These mega companies still want to work on old business models and do little to move forward with the times. There will be a resolution to this one way or the other. In the meantime, as usual, NFL fans will suffer, alternate plans will need to be made and one thing is for certain, the rich will continue to get richer.

References

1 - Peter King SI.com - Monday Morning QB November 19th, 2007

2 - Time Warner Cable Website - Mid Texas Region

3 - Time Warner Cable Website - Nebraska Region

4 - Washington Post Article Authored by Mark Maske "Time Warner Rejects NFL's Offer of Arbitration" December 21 2007

5 - Time Warner Cable Website - New England Region

1 comments:

JeffCMSB said...

I have spent the morning listening to Time Warner lemming after lemming after lemming on WJAB. Why the hell is the NFL any different that ESPN, FOX Sports or any other network. I don't get why people are buying Time Warner's argument hook, line and sinker...WAKE UP PEOPLE!!!! Time Warner can make up any revenue shortage BY SELLING ADS!!!!!! OMG!!! There is no hope!

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