Corporate Battle II: Disney vs. Cox 11-21-03!

Namely: Cox Communications vs. Disney's ESPN networks.

Here's part of an ad that ran in Wednesday's U-T paid for by ESPN: "Cox Cable Wants To Rip ESPN From Your Basic Cable Lineup And Make You Pay More" and refers readers to go to keepespn.com for more information. Part of that sentence is true, if, and I mean if, you are not already subscribing to Cox Cable's Sports Digital Tier package. If you already have that tier, you already have ESPN and ESPN2 on analog; if Cox moves it over to the digital sports tier, all it does is the moving of the two ESPNs would prevent people with VCRs from taping Sunday Night Football and other sports while you are away, because no VCR that I know of is capable of tuning in the channels 100-999 that are part of the Cox Digital band. So the headline is only half true in that sense.

I go to the keepespn.com website under "Cox Cable Tiers Would Cost You More", remember that's true only if you are not already a paying subscriber of Cox's sports digital channels as part of your services with Cox Communications. Here's what the page says: "Cox Cable would charge you an extra fee for the tier." Duh, it already does. Cox has been charging extra fees on their digital package since the time they first began offering the digital tier.

Here's another: "Many consumers would be forced to buy or rent set top boxes from Cox Cable." If you already have the digital channels, you already are paying a rental fee for the set top converter box to bring you the channels in the first place.

Here's their third claim: "You'd need one for every television in your house in order to watch ESPN." Now that's a real price killer, and it's Disney's fault for charging an exhorborant fee of over $2.40 just for the two ESPN channels. Until the government mandates that all TV sets and VCRs are capable of tuning in the digital frequencies, you need a box for each TV and VCR in order for you to receive the digital channels. How much does it cost?

Their fourth claim: "Cox Cable would charge an average of $4.00 per month per set top box." If you're not already a digital tier subscriber and you don't care for ESPN, you don't need to rent the box and pay for the tiers if you don't care about the channels. What does that mean? Your cable bill for the traditional analog portion of the cable channel services will go down.

Yes, it will go down, unless, unless you wish to get ESPN once again on your TV or VCR, but you would have to rent one set top box for each TV or VCR you wish to view or tape ESPN on, and that will cost you money.

"For these reasons and more, ESPN will not allow tiering" as it states on their website.

Also further down the page is ESPN's deceptive convincing that Cox wants to make more money from the sports fans. The truth is, the cost of ESPN is way too high. Cox is trying to get ESPN to control the cost Cox has to pass on to their subscribers, but unfortunately for Cox, they too are also distorting the truth to the readers in their paid ad that appearred on the Thursday's U-T, which I will get to in a few minutes.

I wonder if Roger Hedgecock is trying to get to the real truth behind this corporate war.

Anyway, here's some more incomplete half truths with these three quotes...

"The GAO report lends credence to ESPN's argument that an 'a la carte' suite of services would merely increase rates even more." The Washington Times, 10/25/03

"The GAO (Government Accounting Office) study, though, rejected the idea of allowing consumers to pick and choose individual channels as a means of cutting cable rates. The report said such an arrangement would require expensive equipment and that certain niche channels would likely disappear in the process. " The Chicago Tribune, 10/25/03

"The GAO concluded that increased "a la carte" channels could lead to higher prices for some consumers because of the expected loss of advertising revenue and the expense of adding set-top boxes needed for customized programming." The Atlanta Journal Constitution, 10/25/03

Now, what do you see in these excerpted quotes taken out of context? The claim that allowing consumers to choose cable channels they wish to pay for would require expensive set top boxes is false. Cable companies can already let customers pick and choose to block the cable channels such as MTV, Comedy Central, and Disney Channel by way of having the cable company install a filter that prevents the frequencies of certain cable channels from reaching the household, without the need of a set top box. The problem with that is if dad wants Comedy Central in his den, then he would have to get a separate cable line without the blocks that are in the family room, and the cost for that is unclear whether that would be free or cause the bill to go up, but since that would be separate, then the bill would go up.

I like the idea of getting rid of the set top boxes, but what we need is government to mandate to the TV and VCR manufacturers that the tuners be capable of two-way commmunication with the cable companies, allowing the consumer to pick and choose the cable channels they wish to pay for, and not paying for channels they never watch on their units, plus, a government mandate that the suppliers of the cable channels cannot prevent cable companies from tiering their services. We need federal laws that get rid of the abuse brought on by Disney, Cox, Time Warner, Viacom, News Corp, and others by getting legislation that allows consumers to pay for channels they like, and not pay for those who don't, with two-way converters built in to future VCRs and TV sets. The way this is set up now, consumers have to take the entire analog tier and pay for channels they do not care to watch, and that is not fair.

So, does Cox Cable want to charge more money from the sports fans? Are they using ESPN's high cost of carriage as a threat tactic to get Disney to "moderate their excessive price increases" as it says in the Cox ad Thursday?

What is moderate, you ask? It doesn't mean "lower their prices." It really means "raise the carriage fees at a lower rate than 20 percent," not to lower the price of ESPN's fees. Cox isn't doing a damn thing about getting the price of cable down one bit. Oh sure, let's moderate the prices and let the consumers think that we're lowering the prices. That's a false implication and a dirty trick Cox is trying to pull on us.

Here's the Cox ad headline: "Cox Communications' Pledge to Our Customers". If that's their pledge to raise the rates more slowly, than that should describe their ad more accurately.

"You may know that Cox Communications is fighttign to protect the value of cable TV for American consumers. We're asking ESPN, the most expensive channel on basic cable, to moderate their excessive price increase." Moderate? What about "lower the carriage fee", Cox? Disney is extorting high fees from us consumers to pay for Disney's overpriced sports packages they pay for to air them on ESPN, which stands IMHO for Extorting and Senseless Pricing Network.

"But ESPN is demanding an exhorbitant price increase, up to 20 percent a year. We don't think that's fair to our customers. We pledge to do everything in our power to keep ESPN available to you at a reasonable price" as it says. What is a reasonable price, Cox? $2.50? $2.55? $2.60? I don't think so. How about $1.00? 50 cents? 25 cents? Hey, I think that no cable channel should be allowed to charge more than 10 cents as a cable carriage fee. What about that, Cox? You're not doing a thing to tell Disney to lower their costs of carrying ESPN!

Cox also advertises a website http://www.makethemplayfair.com/. Here's an excerpt: "Cox Communications' Statement Regarding ESPN Attack Ads" ESPN is merely trying to deflect your attention from the real issue: their 20% price increases, inflicted on cable and satellite consumers every year for the last five years. In a world where the average American received a 4% increase in his paycheck this year, and savings accounts are earning 1% in interest — how can ESPN continue to justify 20% increases, year in and year out?" I ask Cox this: How can Cox justify allowing ESPN to keep the cost of their network way above 10 cents a channel? They can't. They can't. No basic cable network is worth more than 10 cents.

More on the website: "ESPN's annual price increases are 20 percent, and Fox Sports is asking for a 35 percent increase in 2004. Anyway you look at it, these steep increases are out of line with today's market."

I applaud Cox for taking a stand on ESPN and Fox's high extortion practices, but I also boo Cox on not telling the suppliers of these channels to lower the costs of these services, not moderate the price increases, lower the prices!

Some numbers from the website for you to crunch on:

"Fox Sports has proposed a 35% rate hike in 2004 for Cox's carriage of Fox's regional sports networks in 11 cable systems representing about 3.3 million customers. If you consider the two new cable networks that Fox would require Cox to launch nationwide, the increase is actually much higher: 47% for 2004 and an average of 18% a year over the five-year contract."

"ESPN has raised the price it charges Cox by an average of 20% a year for the past five years. If that trend continues, ESPN alone will cost more than $10 per customer per month in less than 10 years." Yikes! That's the price of HBO in 1979! This is ridiculous. ESPN must get their prices down and I do mean DOWN!

"Cox pays $2.61 per customer per month (or about $170 million per year, still too much money) to distribute ESPN. ESPN is Cox's highest-priced standard-cable channel. In fact, it costs more than the price of the seven top-rated standard-cable networks combined."

ESPN and Fox Sports' prices are disproportionate to their ratings. Together, they account for 32% of Cox's standard-cable programming costs, but only about 8% of standard-cable viewing."

"In the past five years, the price of ESPN and Fox Sports has risen three times greater than the price of the about 40 other major standard-cable networks."

"While Cox can sell advertising time on those networks, the related revenue is but a tiny portion of their overall cost. For instance, Cox can sell two minutes of ad inventory per hour on ESPN, which generates about 30 cents per customer per month (far less than the amount claimed by ESPN in recent media reports). However, that lowers ESPN's net cost per customer only to $2.31." Still too high, folks. The price is still too high.

Cox still goes on and on about moderating the price increases. Again, once again, it means raising your cable bill. Cox is going about it in the wrong way.

Customers, contact Cox cable and ESPN and demand that the price of the sports channels must not go up 20 percent, not go up even one percent, but to go down by at least 68 percent, enough to drive the cost back under $1, or down to 10 cents if that's how you put the value of ESPN. You can also call Cox to tell them that if ESPN won't do that, put ESPN on the digital tier and drop the price of the cable bill by $2.61 and put an end of the extortion of ESPN owned by Disney.