ESPN Set To Pass $7 Sub Fee In 2017

For help with its massive NFL rights bill and likely re-upping with the NBA, ESPN can continue to count on hefty per-subscriber fees that look to cross the monthly $7 mark in 2017. Based on distribution in 100 million homes, that $7 amount would give it an annual take of about $8.4 billion in affiliate fees alone within five years.

ESPN’s current deal with Time Warner Cable calls for it to receive more than $5.40 a sub a month starting in the middle of this year; then passing the $7 mark in 2017; and closing in on the $7.50 mark the following year. The deal calls for an annual increase in the 6.5% range.

By the end of this decade, ESPN is set to collect just about $8 a sub a month.

Time Warner Cable serves 12 million homes, but if ESPN’s deals with other operators follow the same general pricing model, total sub fees covering 100 million homes should pass $9.5 million by the end of the decade.

The details (which may have since been altered) of the Time Warner Cable deal that was announced in September 2010 became public at a trial Monday, where Dish Network is suing ESPN charging it with violating “most favored nation (MFN)” agreements. MFN deals look to guarantee an operator the same effective rates as other distributors.

But it is not as simple as if one operator pays $7 for ESPN, another pays the same. The trial in New York federal court makes that abundantly clear with ESPN witnesses offering insight into how operators can choose various options, giving them what would amount to effectively the same rate as what another pays.

Dish believes that with multiple ESPN networks such as ESPN Classic and ESPN Deportes, ESPN violated MFN provisions that had it paying more than other operators. ESPN argues that when all sorts of calculations are taken into consideration such as what tiers networks are placed on, how many subscribers they have, any launch or marketing support given and other factors, then the numbers show that Dish has been made whole.

Testimony can get weedy as ESPN senior vice president Justin Connolly and former ESPN financial executive Travis Hutcheson showed in parrying with a Dish attorney. One of Dish’s claims is that it paid more to offer Spanish-language network ESPN Deportes than DirecTV, Time Warner Cable and Verizon -- violations of MFN clauses.

For DirecTV, Dish argued that a 2007 deal between ESPN and DirecTV covering Deportes carriage in Puerto Rico and the U.S. Virgin Islands had DirecTV paying $0.08 a sub, while Dish was paying $0.35.

The same numbers applied, Dish argued, to another deal for Deportes carriage covering a few markets in 2007. With that agreement, Time Warner Cable was paying $0.08 a sub, while Dish was paying the $0.35.

A later agreement had Verizon paying $0.11 to carry Deportes in 2010, while Dish was paying $0.41. But, in a sign how complicated MFN agreements can get, Hutcheson testified Verizon got the lesser price because it agreed to pay more for the flagship ESPN network. (Dish is paying $0.47 this year for Deportes.)

 

 

 

Tags: television
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7 comments about "ESPN Set To Pass $7 Sub Fee In 2017".
  1. Frank Gallagher from F. J. Gallagher & Associates , February 19, 2013 at 6:11 p.m.
    These ever-escalating fees for content, particularly sports, are why people are cutting the cable cord. One has to wonder what the cable subscription numbers will look like in the out years mentioned in this article if these fees continue to increase.
  2. Michael Kaplan from Blue Sky Creative , February 19, 2013 at 6:25 p.m.
    Fees for sports -- which I rarely watch -- are getting out of hand. It's like making HBO mandatory for anyone who wants more than a few basic channels. Cable companies give you an option for premium channels. Well, at this point, ESPN is a premium channel. Cable and satellite companies are helping to destroy their own business. As soon as an a la carte system becomes available, I'll be there. And millions of other non-sports-fans will be there, too.
  3. Kevin Killion from Stone House Systems, Inc. , February 19, 2013 at 6:30 p.m.
    Holy crap, $84 per year of my annual cable bill would go to a channel I never watch? Crazy!!!
  4. Paula Lynn from Who Else Unlimited , February 19, 2013 at 7:39 p.m.
    A few billion here, a few billion there and all of sudden there's no fiscal cliff. Really, these rates are absurd to pay for multi-million per year athletes and multi-billion owners. And don't anyone say about all the other jobs involved. They still can be involved without the tippy top sucking the life out of everyone.
  5. William Hughes from Arnold Aerospace , February 20, 2013 at 8:10 a.m.
    As costs continue to escalate more and more people, especially those who don't watch sports will continue to "Cut the cord". A house divided against itself cannot stand. Eventually the entire system will come down like a house of cards.
  6. Marla Goldstein from Around The Bend Media , February 20, 2013 at 6 p.m.
    It's only going to get worse. TWC is in the process of setting up an RSN to carry the Lakers and the Dodgers--even paid something in the neighborhood of $7bn for the broadcast rights for the Dodgers. I'm not a baseball fan, but I loathe the Dodgers with my heart and soul and resent being forced to pay for this RSN. Not a fan of basketball, either or the Lakers in particular, but there are others in my HH who are. A la carte can't get here fast enough.
  7. Jeff Pugel from Vladimir Jones , February 20, 2013 at 11:32 p.m.
    It is exactly reasons like this why I have recently cut the cord. Until as consumers we are given choices, this will become a slippery slope for MSOs and the cable networks. I have no problem heading to the neighbors house or the local sports bar for those handful of must-see games carried on ESPN.