Time Warner vs. NFL Network

by Michael David Smith

The NFL Network will go from a luxury item to a must-have for football fans when it begins carrying regular season games in November. But millions of Time Warner and Cablevision customers in New York will miss out if the network and the cable companies can't resolve a battle over the fees charged to subscribers.

The NFL scored one round last week when the Federal Communications Commission forced Time Warner Cable to put the NFL Network back on cable systems it bought from Adelphia and Comcast. But the FCC's ruling doesn't affect the New York market, where most cable customers in the city and outlying areas have never had the NFL Network.

The dispute centers around Time Warner's desire to put the NFL Network on a more expensive premium tier, rather than making it part of the basic package, as it is on other cable systems and DirecTV. Cablevision has kept a low profile on the issue, but Time Warner has launched a Web site, NFLGetReal.com [1], that encourages customers to complain to the NFL Network about its fees. The NFL says that it's Time Warner that needs to get real.

"They want to put us on a sports tier, with viewers paying extra," a spokesman for NFL Network, Seth Palansky, said. "No other cable system in the country carries us on a sports tier. We won't allow that to happen. We see that as a way of trying to extort NFL fans because they're passionate."

The NFL Network started two and a half years ago as a relatively minor channel televising news about the league, game highlights, NFL Films footage, and preseason games. It now reaches 41 million homes. That's less than half of the country's cable and satellite subscribers, but when the league announced that the NFL Network would broadcast eight regular-season games for 2006 on Thursday and Saturday nights in November and December, football fans increasingly requested that their cable companies start carrying the network. Time Warner says the NFL demanded that cable companies pay exorbitant rights fees for the network and include it as part of the basic package, forcing all subscribers to pay for it.

"We want to make the NFL Network available everywhere to all of our customers across the country,"a spokesman for Time Warner, Keith Cocozza, said. "We want to do this in the fairest way possible. Where we think the network belongs is on the sports tier."

Fans who just want to see as much NFL action as they can hope the two sides can compromise. Making the customers happy would seem like the best option for both the NFL and Time Warner, but a stalemate like the one in 2003 that forced millions of Cablevision subscribers to miss Yankees games on the YES Network is possible.

"Usually somebody blinks in this, but it can happen," the director of the Center for the Study of Popular Television at Syracuse University, Robert Thompson, said."We've had a World Series and an NHL season canceled because neither side would back down long after it was damaging to both sides."

The NFL Network might have the upper hand in the dispute for the simple reason, Thompson said, that viewers who don't have access to a network they want, usually blame their cable companies.

"People who follow this issue closely might see some of the nuances of the fact that there are two parties here not agreeing," he said. "But the immediate response is to pick up the phone and complain to the party you write a check to every month, and that's not the NFL, it's the cable company."

Before it had regular-season games, the NFL Network charged cable companies about 30 cents a subscriber each month. It now charges about 90 cents. Even though hard-core football fans find NFL Network every bit as indispensable as ESPN, the popularity of ESPN allows it to charge significantly more to cable carriers. ESPN charges about $3 a month.

"We're not anywhere near what ESPN charges," Palansky said. "We're not even in the same universe let alone the same continent in terms of pricing."

Both sides are hugely profitable enterprises.Time Warner last week reported second-quarter revenue of $2.72 billion for its cable TV unit.The NFL's new deals with Fox, CBS, ESPN, NBC, and DirecTV give the league more than $3.7 billion a year in television revenue even before its own NFL Network is included.

The NFL Network wants to be available on basic cable in millions of Time Warner and Cablevision homes because greater availability allows it to charge more for advertising. But it also wants to get as much money as it can per subscriber. Fans are caught in the middle, just hoping the dispute will get resolved before Thanksgiving, when regular-season games start appearing on NFL Network.

"Fans just want their channels," Palansky said."They don't want to hear about two companies fighting. They pay enough for their cable bills already and just want to get the channels they want. All the rhetoric and all the backand-forth is hot air."

Time Warner points out that even if it can't reach a deal with NFL Network, fans won't miss their local team's games because the league puts all games on broadcast television in the markets of the teams who are playing. So New Yorkers can watch the Giants play the Washington Redskins on NFL Network on December 30 even if the cable companies aren't carrying NFL Network by then. (The Jets do not play any NFL Network games this year.)

One reason the cable companies want to get a deal done is that if they can't reach a deal with the NFL Network, some customers will leave for satellite television. DirecTV, in particular, is an increasingly popular option with football fans because of its Sunday Ticket package, which gives subscribers access to every NFL game.

"In the old days a cable franchise could do what it wanted and you didn't have a lot of choice," Thompson said. "Now with the satellite option, Time Warner doesn't want to alienate its customer base because if people make that shift, they tend not to go back again. So they've got a lot at stake. And, of course, the NFL Network wants to maximize its audience reach so there's a lot at stake for both sides."

Still, satellite users are a minority everywhere in the country and especially in New York City, where many residents can't get satellite television either because they live too close to tall buildings that block the signal, or because they live in apartments with landlords who do not allow them to attach satellite dishes. That's why the NFL knows it needs the cable companies if it wants to reach New York viewers.

"Suffice to say," Palansky said, "We are not satisfied with our distribution in the largest market in the country."

This article originally appeared in the New York Sun [2].