ESPN Ends Ugly Fight With Cox Over Fees (Feb 19, 2004)

Dear Keep ESPN Team Member:

We are pleased to tell you that ESPN and Cox Communications have signed new long-term agreements for the continued distribution of ESPN on Cox Cable. ESPN and ESPN2 will remain right where they are today: on Cox’s basic cable lineup, with no separate charges and no need for a special television set-top box. Cox will continue to carry ESPN Classic, ESPNEWS and ESPN HD, and will launch ESPN Deportes.

From all of us at ESPN, thank you for your support. Viewers like you have made ESPN what it is today and we are committed to continuing to serve you by delivering the very best in sports and entertainment programming.

Thank you.

From the makethemplayfair.com website:

Cox Continues Carriage of ESPN, ESPN2, ESPN Classic, ESPNEWS and ESPN HD. Cox Will Launch ESPN Deportes

ESPN, Inc. and Cox Communications, Inc. today announced an agreement to renew and extend Cox's carriage of multiple ESPN networks and services. The announcement was made by George Bodenheimer, President, ESPN, Inc., and Jim Robbins, President and CEO, Cox Communications, Inc.

"We're pleased to reach agreement with ESPN," Mr. Robbins said. "We are resolved to protect the value of cable television service for our customers, and with this agreement we believe we made material progress in accomplishing that objective."

Mr. Bodenheimer said, "We are pleased to have completed agreements with Cox that are good for both parties, and great for fans who will continue to enjoy ESPN and ESPN2 on expanded basic into the next decade. These agreements are consistent with ESPN's strategic plan, begun over a year ago, to offer our affiliates new deals with moderating rate adjustments for ESPN off a solid rate base, in exchange for long-term commitments and the distribution of new services from ESPN like ESPN HD and ESPN Deportes."

The long-term agreement includes the continued distribution of ESPN and ESPN2 on expanded basic; the carriage of ESPNEWS, ESPN Classic and ESPN HD and the launch of ESPN's new 24-hour Spanish-language network, ESPN Deportes, in markets where Cox offers a Spanish-language tier.

The AP and other wires provide additional coverage.

Sports cable network ESPN has reached new agreements with two cable television systems, ending a particularly nasty dispute with Cox Communications that saw the launch of dueling Web sites and ad campaigns, advertised on television and on the radio aimed at a predominantly male audience.

The deal with Cox keeps ESPN and ESPN 2 on the extended basic tier level of cable service — meaning it will be available to most Cox cable subscribers. Cox, in the face of what it said was unwarranted price increases by ESPN, had threatened to move the cable channels to a premium level of service such as the digital tier, which costs an average of $12 additional a month for a converter box rental and requiring the purchase of one no-choice programming package in order to purchase another as is with Cox Communications.

Specific terms of the new deals were not released, except that ESPN confirmed the new annual price increases will be less than 20 percent. Still not good enough, in fact, the fact that there are still annual price increases in the new contract is a win for Disney's Extortion and Senseless Pricing Network, and a loss for cable subscribers, the vast majority of which watch ESPN only when there is a major sports broadcast of MLB baseball and NFL Football on. The price increases for ESPN is unacceptable and solidifies parent Disney as one of the most consumer-unfriendly corporatations in America.

ESPN still charges the highest wholesale rates of any ad-supported cable network, which is high enough to warrant it be converted into a pay channel, and far too expensive to be on the extended basic tier. Last year, it said it would seek to negotiate new, longer-term deals with lower rate increases as it expands its services, many of which would provide mediocre redundant programming very few would care to watch if they got paid to do so anyway.

The cost of sports programming has become an increasingly contentious issue in the cable industry. Cable providers say the high price they pay for sports programming like ESPN has contributed to rising home cable rates, and the high cost of sports packages are, naturally, trickled down to the consumers to pay for whether they watch the NBA, NHL, college, MLB, and NFL or not.

ESPN counters that its channel is one of the main reasons people subscribe to cable. Unfortunatle for them, that isn't so anymore in today's world since the main reason many people subscribe to cable is so they can get their favorite local channels in clearer, watch the channels that feature classic reruns such as TV Land, Nick at Nite, and Game Show Network, and cartoons on several channels not seen on the local channels.

Cox had said it would not renew an ESPN contract that included a 20 percent annual fee increase, although previous deals had contained similar hikes.

The Cox deal was set to expire next month. As part of the agreement announced Thursday, Cox also agreed to carry ESPN's new Spanish-language service and continue to carry ESPN high definition, ESPN News and ESPN Classic. Each service comes with its own separate charge.

UPDATE 2-20-04: ESPN entered into a nine-year carriage agreement Thursday with cable operator Cox Communications and a separate pact with Charter Communications.

Both agreements yielded moderate rate increases for ESPN, far and away the most expensive cable channel with a carriage fee estimated north of $2.50 per subscriber.

Although ESPN went into negotiations requesting a double-digit percentage increase in carriage fees, sources said, it walked away from the Cox deal with an average 7% hike over a nine-year deal. The first five years of the deal command hikes as high as 13%, while the last few years as low as 5%. Details of the Charter deal were not determined.

ESPN, as well as spin-off channels ESPN2, ESPNews and ESPN Classic, will all return to the channel lineups as a result of the agreements, which also pave the way for the launch of Spanish-language digital network ESPN Deportes, high-definition programming source ESPN HD and Internet offering ESPN Broadband, the last of which only Cox granted carriage. Neither deal covers ESPN video-on-demand programming.

An ESPN spokeswoman denied that Disney had any involvement in the negotiations.

The rising costs of sports programming is arguably the sorest subject in the cable industry. Rather than pass on fee increases to subscribers, operators have threatened the likes of ESPN and Fox Sports Net with either placing them on a separate tier at extra cost to subscribers or outright removal from basic carriage. Sports networks routinely cite the exorbitant license fees it must pay to leagues and teams in order to broadcast their games.

The issue first exploded into full view early last year in a bitter standoff between Cablevision and YES, a network that broadcasts New York Yankees games. An interim solution was devised with the help of New York Mayor Michael Bloomberg. More recently, Cablevision and Time Warner Cable began squabbling over Cablevision-owned MSG and Fox Sports New York.