DirecTV CEO Mike White has got to be pulling for the Los Angeles Lakers to continue their dysfunction. The team with so much promise has started the season 1-4 and Southern Californians are apoplectic. Maybe Angelenos will stop watching for a while. That might keep some DirecTV customers from complaining that the satellite operator still doesn’t offer the regional sports networks (RSNs) carrying the team’s games.
While more operators – from AT&T to Cox – have inked deals with Time Warner Cable (TWC) to carry its new English- and Spanish-language RSNs, DirecTV continues to balk at the carriage fees it's seeking. White recently said what TWC is looking to charge serves as another “example how broken the system is” that has programmers increasingly facing higher payments.
On Thursday, White’s adversary in the negotiations, TWC's Melinda Witmer, said DirecTV is being a bit two-faced. Witmer, TWC’s Chief Video and Content Officer, is moonlighting by trying to secure carriage deals for the TWC RSNs.
Her day job is on the other side, where she negotiates the carriage deals for TWC. That includes haggling with DirecTV for its Root Sports RSNs.
“Time Warner Cable pays a whole lot more for Root Sports than we’ve asked them to pay for the Lakers ... the system’s broken and it’s a mess when it’s not their product,” she said.
The rhetoric is pretty standard stuff when stalled negotiations go public, but what’s clear from executives like Witmer when she’s buying not selling is multichannel distributors are trying to be more discerning in what channels they offer. A few years ago, it would have been unheard of for DirecTV – which has built its brand around sports – not to have a coveted network like the Lakers’ home base.
“We’re having to make decisions we just didn’t have to make 24 months ago,” said Jeffrey Weber, an AT&T president of content and ad sales, who joined Witmer on a Sports Business Journal panel.
One of the reasons DirecTV's White has cited is the launching of increasingly more narrowly focused sports networks, such as the RSNs built around the Lakers and ESPN’s Longhorn Network.
AT&T’s Weber thinks the marketplace needs some modifications. The model -- where programmers charge operators more and consumers face higher bills -- could crack. “At some point that stops working,” he said.
But there’s just no sign it will. While Weber and other distribution executives have an interest in lower content costs, they keep paying astronomical rights fees because consumers want the stuff.
Further, Witmer suggested sports can help drive down cord-cutting. Unlike entertainment content that is widely available online for free or relatively cheaply, sports has taken more of a walled-in approach.
But as carriage disputes continue and the posturing becomes more barbed, Fox distribution president Michael Hopkins made a plea for bipartisanship. He suggested both operators and programmers keep their recriminations behind closed doors and together make the case that a cable package brings great value to consumers.
“We should be spending time touting that,” he said.
TWC paid a fortune to get rights to the Lakers and Witmer said her role reversal has brought new perspective. There's a need to offer the kind of value that TWC would want to pay for itself..
“It’s certainly been an illuminating experience in a lot of ways, not the least of (which is) understanding really well the challenges that other distributors have,” she said.
With the Lakers’ programming, viewers can watch it in Korean through a SAP process, but mostly the increased value falls under rights to make content available anytime, anywhere, anyhow.
In the new environment, as operators make decisions on what to pay for networks or whether to carry them at all, they’re much more focused on data as a guide. “It’s viewership, but it’s more about intensity of viewership,” Witmer said.
Operators have access to set-top-box data giving them the type of granular information about tune-in levels that advertisers and programmers covet so much. The data is “far more sophisticated than a Nielsen sample,” Witmer said. (Nielsen itself is pursuing it.)
While sports rights get most of the attention, Witmer noted that costs for acquiring entertainment programming are also under more pressure. She said back “when margins were huge” -- they're still pretty huge -- a TWC might carry a network with few viewers. Now, the price of entry is harder and independent networks could suffer.
But she offered up a solution for content producers who want TWC’s attention: build a brand online -- where there is plenty of data available -- and then come make a pitch. “It’s actually a whole lot easier to evaluate than a sizzle reel,” she said. TWC has seen some promising opportunities.
TWC believes launching the Lakers RSNs was a unique opportunity. The company has loads of customers in Southern California and felt it could save money by selling rights to the team’s games, rather than paying for them.
It isn’t on a path to gobbling up sports rights elsewhere. Weber, the AT&T executive, said the telco isn’t either, even though it apparently liked TWC’s approach.
“You bid on the Lakers, so watch out,” Witmer joked.
“But we stopped when it got crazy,” Weber cracked.