Prexy blames infrastructure costs for increase
WASHINGTON — ESPN is fed up with taking the blame for rising cable TV rates, and Thursday the flashy sports net lashed out at its most ardent critic, Cox Communications Inc.
ESPN held a reporters cattle call at the National Press Club Thursday at which ABC Sports prexy George Bodenheimer argued that many factors — including the cable industry’s costly digital upgrade — have done more to drive up cable rates than higher programming costs, as Cox argues.
“I’m here to point out the inconsistencies, omissions in their rhetoric and attempts to blame ESPN for its retail pricing,” Bodenheimer said. “You need to have the complete picture.”
Bodenheimer also released a study, based on information from the Federal Communications Commission and media analysts, that blamed the sharp rise in cable rates on the more than $75 billion the industry has invested in infrastructure upgrades in recent years, including the conversion from analog to digital, phone service and high-speed Internet options.
High capital costs
The study shows that cablers paid $18.2 billion in capital costs, $19.7 billion in loan interest for those costs and $10.2 billion for basic programming costs, including the purchase of sports channels such as ESPN. It also claims that basic cable programming costs account for only 20% of the cost increase faced by cablers in recent years.
But Cox Communications didn’t take the drubbing lying down. The company launched a Web site, makethemplayfair.com, that explains their dispute with ESPN, as well as Fox Sports, and their reasons for blaming popular sports programming for the rate hike. Cox isn’t throwing soft balls, either. The Web site’s home page contains a large photo of a modestly dressed woman sitting on what appears to be a living room couch. She wearing a hockey mask and frown.
“You are paying dearly for Sports TV,” the home page reads. “Like it or not…”
Bodenheimer defended the numerous increases ESPN has demanded in recent years by pointing to the added value the sports network provides a basic cable package in terms of attracting advertising and signing up additional cable customers.
“It is patently absurd to suggest that what Cox offers would be better if ESPN is ripped out of expanded basic cable or dropped altogether,” Bodenheimer argued. “Cable offers enormous value and ESPN is a major part of that value. At $40 a month we think this is one of the greatest entertainment bargains in America.”
A spokesman for Cox Communications rejected the value-added argument as a good reason for raising rates roughly 20% a year.
“We agree that cable is a terrific value, and we know that many of our customers enjoy watching ESPN, but the rapid and unrestrained rise of sports programming costs is threatening the value of cable television for American consumers,” the spokesman said in a statement. “To quote George Bodenheimer, ‘Like any business, you want to pay less for your product.’ We’re trying to negotiate a better price for Cox customers.”
Cox is the target of ESPN’s wrath only because it is the first to renegotiate its contract with the alphabet net and the first to take issue with the rising sports programming costs. Cabler giant Comcast is also expected to take issue with the sports channels’ repeated price hikes when it begins to renegotiate its contract in the coming months.
ESPN is a member of the National Cable & Telecommunications Assn., but the trade group took issue with some of the net’s claims and chided it for going public with the private business tussles.
“ESPN’s economic study oversimplifies the economics of cable TV,” NCTA prexy Robert Sachs said in a statement. “When sports programming fees have increased significantly year-to-year due to soaring player salaries and TV rights, it’s impossible to ignore these costs as a contributing factor in cable price increases.”
The public row comes amid growing concern over rising cable bills and new fear that the government will step in to regulate it. The NCTA has launched a newspaper ad campaign trumpeting all the various steps it has taken to provide customers with better service — an attempt to keep the feds at bay.
The industry is bracing for the results of a General Accounting Office investigation into cable rate increases, requested by Sen. John McCain (R-Ariz.). The report is expected in a matter of days.