TV negotiations hampering Fox Sports 1, broadcaster of Utah vs. Utah State football game
David Duprey, AP
When the University of Utah and Utah State take the field on Aug. 27 in Rice-Eccles Stadium, the contest may feature an antagonizing challenge football fans in the state of Utah have seen many times before: finding a friend whose TV package actually carries the game.
Then again, it may not.
Mark it down as a definite TBD.
The 2013 "Battle of the Brothers," the national kickoff to the 2013 college football season, is scheduled to be the very first college football game ever broadcast on Fox Sports 1, a soon-to-be christened network aiming to be the latest and most significant challenger to juggernaut ESPN's dominance. It is supposedly set to launch into 90 million homes across the nation on Aug. 17, 2013.
Not so fast. Fox and three of the nation's four major cable and satellite distributors are hung up in negotiations with only a month before the channel is set to launch. Time Warner Cable, DirecTV and Dish Network, representing 45 million viewers nationwide, have all put Fox Sports 1 on hold. The only major distributor in Utah to pick up so far is Comcast.
It's not like Utahns have never had to deal with such a problem before. BYU and Utah fans certainly remember the headaches the now-defunct The Mtn. Network caused. Even today, fans of Utah athletics can't see all of Utah's contests if they subscribe to DirecTV — the satellite provider doesn't carry the Pac-12 Networks.
What's the difference this time around? By comparison, The Mtn. was small potatoes, a conference-owned, regional cable channel with no presence in a market larger than Denver.
This is Fox, a behemoth national media conglomerate whose parent company, News Corp., grew so large that it split into two different companies, one composed of primarily publishing properties that retained the News Corp. name, the other of broadcast and film properties that were renamed 21st Century Fox Inc.
Fox owns a programming network that distributes television programming to affiliate terrestrial broadcasters nationwide — KSTU is Utah's local affiliate — several regional cable properties and several national cable channels, among which are FX, FX Movie Channel, Fox Business Network, Fox News Channel, Fox Deportes, Fox Soccer Channel, National Geographic Channel, Nat Geo Wild, Speed and Fuel TV.
If the last two on that list don't look familiar, don't be surprised. Speed and Fuel TV are undergoing a complete transformation in order to become Fox Sports 1 and Fox Sports 2, respectively.
Because Speed and Fuel TV are already widely distributed at an inexpensive price — 22 cents per customer per month, according to SNL Kagan — it is anticipated that the revamped, sports-oriented version of the networks would be instantly available on Aug. 17, 2013, in 90 million homes for much less than self-proclaimed Worldwide Leader in Sports ESPN charges per customer per month, and they charge a whallop.
ESPN pioneered the cable distribution model by becoming the first cable network to charge a carrier a small fee per customer per month. That fee has ballooned over the years. According to data provided by SNL Kagan, ESPN charges between $4.75 and $5 per customer per month, and current projections are that the figure will grow to $6.95 by the end of 2016.
As Fox has begun to shop the rates for the new network, they have been very competitive. Some reports peg the opening figure at 80 cents. According to SNL Kagan, Fox aims to raise the fee to more than $1 per customer per month — five times Speed's fee — by the end of 2015. That means $1.7 billion in revenue, more than $500 million in cash flow and a 30 percent profit margin.
Can anyone blame Time Warner, DirecTV and Dish for blinking? Raising the price to $1 from 22 cents represents a price increase of 354 percent, and these companies still pay for ESPN.
Although the hike may be representative of demand as well as the cost of production — sports broadcast rights are extremely expensive these days — satellite and cable providers are more regularly balking at paying high rates for sports programming. They have fought back against the high cost by simply leaving stations off the air, though usually the channels left out are regional, not national stations.
The stakes are very high for Fox. Their new Fox Sports 1 has already secured rights for much more than USU-Utah. In the first weekend alone, FS1 is scheduled to broadcast games that feature Boise State, Washington, Kansas State, Baylor, Oregon and Oklahoma. The station has invested a tremendous amount of money to secure rights for BCS and non-BCS programs throughout the season across the country.
The decision to leave a channel with that sort of lineup off the air for more than a few days because of a cost dispute would be unprecedented, and truthfully, it's not very likely. Too much money is at stake for both sides to not come to any sort of agreement.
But that's not to say that by the time the station launches, disputes will definitely be resolved either. There's precedence for failed station re-boot.
When Fox switched Fox Reality to Nat Geo Wild, it ran loops of old reality TV programming for carriers that didn't bring on the new network. No one cared. Turns out reruns of reality programming were not drawing viewers at all. Subscribers of carriers who had Nat Geo Wild got to see their fuzzy friends, and the rest got more reruns.
If negotiations persist past Aug. 17, the same could happen for Speed. Fox will likely feed loops of garbage to fulfill its obligations for the channel, while subscribers of Comcast and other carriers across the country will get sports programming.
As the college football season approaches, pressure to resolve the dispute will mount from sports fans still watching whatever is showing on Speed — few watch the channel regularly enough to know for sure — and profits will continue to slip through the cracks. Collateral damage to the fans in the early going will be negligible.
But if the parties involved can't get their act together by 6 p.m. MDT on Aug. 27, 2013, collateral damage of the dispute will begin to pile up in a major way, beginning with the Salt Lake and Cache valleys.
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