Inside Move: Cablers read blitz at ESPN

Cabler creates new fee deal for lowered rate of increase

NEW YORK — ESPN is playing hardball with cable operators.

The sports channel has pitched a pricey new deal that may become a watershed in the battle over humongous prices charged by networks.

Cable systems now pay monthly fees to ESPN that come to more than double the rate of the next most expensive nationally distributed cable programmer.

ESPN engineered a big leap in the already enormous fees it was charging operators when it outbid TNT for exclusive cable rights to a package of Sunday-night NFL games beginning in 1998.

Because NFL games generate higher ratings than any other sport, cable operators and satellite distribs signed a contract to pay ESPN a yearly increase of 20% through as late as 2010 — bigger hikes than any other network had ever even tried to impose.

As those 20% boosts began kicking in, operators started screaming bloody murder. Because of the bellyaching, ESPN has now come up with an alternative contract .

In the new deal, which for early adapters would take effect Aug. 1, the percentage jump would drop from 20% a year to 16% right away. Over the next five years, the 16% would drop 1% each year, leveling off at 11%, where it would stay through the final year of the contract.

In exchange for the lowered rate of increase, ESPN is asking cable systems for wider clearance on multiplex nets ESPN News, ESPN Classic, ESPN Deportes (Spanish language) and ESPN HD.

ESPN insists that cable systems will pay less under the new deal for all of those net than they do under the current pact.

But one operator who did the math says that if he accepts the new offering, billed as cable system-friendly, he’d still end up paying a staggering monthly fee of $9 a subscriber in 2014 — more than quadruple what he ponies up now.

The inclination of this operator, and two others contacted by Variety, is to stick with the current ESPN deal, even though it calls for 20% increases for the next three-to-five years, and then march to battle with ESPN over the next contract.

But in these negotiations, ESPN clutches the whip hand: It has forged deals with football, basketball, baseball and hockey — and runs the popular “SportsCenter” umpteen times each day.

A cable system would be committing economic suicide by depriving its subscribers of ESPN.

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