In what could end up as a breakthrough on the thorny issue of retransmission consent, the third largest cable operator in the U.S., Continental Cablevision, has agreed to pay the ABC- and Hearst-owned TV stations up to $ 20 million over the next six years for new all-sports cable network ESPN2.
In exchange for the $ 20 million, Continental gets not only ESPN2 (which is 80% owned by ABC and 20% by Hearst) but also permission to carry the signals of ABC’s and Hearst’s O&Os in all the markets where the stations and the cable systems overlap.
The arrangement allows Continental to continue to proclaim, like most of the major cable operators, that it will not pay cash to TV stations for the retransmission of their signals.
“We’re sending out copies of this agreement to every other cable operator in the country,” says Ray Joslyn, group head of Hearst Entertainment & Syndication. “It’s a deal that solves a lot of problems.”
Bob Thomson, senior VP of Tele-Communications Inc., the largest cable operator in the country, said the Continental model “could be the basis of a broad agreement with ABC” in which TCI would pay the ABC and Hearst stations not for retransmission consent but for ESPN2. “It’s a creative solution.”
Follows Fox deal
TCI inked a similar deal this spring with the Fox TV stations in which it agreed to pony up about $ 30 million for a new Fox entertainment-based basic cable service. As part of the deal, the stations agreed to waive any TCI cable-operator fees for retransmission consent.
In addition, NBC is floating as many as three new cable networks — one consisting of news/information, one with sports news and the third a Spanish-language news operation — as devices to get cash out of cable operators for carriage of the NBC-owned stations. Although Continental, ABC and Hearst didn’t discuss dollar figures, one insider says Continental, which owns cable systems serving 2.9 million subscribers, will end up paying a monthly fee of about 10 cents a subscriber in the first year of a six-year deal. That fee will go up slightly each year and top out to around 18 cents a month per subscriber by year six.
Another source says that ABC and Hearst are insisting that Continental launch ESPN2 by Oct. 1 — moved up from a previous November launch date — on systems that reach at least 25% of its total subscriber count, a figure that has to rise to a minimum of 75% by the end of 1996.
“This deal protects the flank of ESPN, which is one of the great cable programming services,” says Mike Mallardi, president of the ABC broadcast group. “And it gives significant incremental value to ESPN2.”
Mallardi acknowledges that ABC was pushed into making this cable-friendly proposal by the intractibility of cable operators to paying cash for carrying TV-station signals.
“I want the ABC TV stations to be seen by cable viewers,” he said, adding that pocketing cash from cable operators “is not part of the birthright of a TV station,” even though the regulations passed by Congress last year give broadcasters the right to ask cable systems for money.
At a press event in Los Angeles, ESPN prez Steve Bornstein said he’s hopeful ESPN2 (being marketed as “the deuce”) will reach 3-4 million subscribers when it premieres and predicts a launch second only to Ted Turner’s TNT.
Sports news and information will form “the cornerstone of this service,” he said, with Keith Olbermann moving over to anchor a three-hour, four-night-a-week “SportsNight” show beginning Oct. 2. Weekend host Suzy Kolber will team with Olbermann as well as a to-be-determined third anchor.
In addition to the Olbermann segment, ESPN2 will feature hockey as well as a variety of fringe sports squeezed off ESPN by higher-ticket major sports deals. Bornstein added that ESPN is hoping to renew its baseball pact, but with a reduced number of games — down to a Wednesday doubleheader and Sunday-night contest.
Bornstein maintained that research had gone into ESPN2 long before retransmission consent arose but that the service clearly provided an alternative for dealing with the issue.
It was also announced that ESPN will introduce a 90-minute “Monday Night Football” pregame show, “NFL Prime Monday,” in the fall hosted by Mike Tirico plus analysts Joe Theismann and Craig James. The show will air from 7:30-9 p.m. ET leading into the game broadcast on ABC, which, as noted, owns a majority stake in the cable network.