Carriage For Equity: DirecTV Gets Slice Of Tennis Channel

by David Goetzl, Sep 24, 2007, 7:00 AM

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The Tennis Channel's recent distribution boost of approximately 9 million homes via DirecTV came with a price. In exchange for the added reach, the satellite operator received an equity interest in the four-year-old venture.

Late last month, the network launched on DirecTV and was placed on a tier that reaches a little over half of its 16.3 million homes. The move boosted reach of the channel which, like most fledgling cable networks, face a challenge in gaining distribution as MSOs argue their capacity is close to full--nearly 20 million.

In addition to gaining a minority stake as part of the deal--the satellite operator and channel refuse to disclose how large--DirecTV now offers the special-interest network other bonuses. It pushes its strategy of differentiating its menu from cable competitors, while it gets to carry an HD version of the Tennis Channel starting in December. Such carriage helps move toward its well-publicized goal of offering 100 games by the end of the year, and it opens possibilities for offering what it refers to as "enhancements" that separate it from competitors.

Those "enhancements" began after the carriage deal closed last spring, during DirecTV's special two-week airing of the network during the French Open. An option allowed viewers to watch up to six matches at once on a special channel, plus choose to listen to audio of any one match and select a match to watch in full-size on a separate locale.

Word of DirecTV's investment-for-carriage arrangement--it was unclear whether it was a straight swap or whether DirecTV or Tennis Channel would pay the other in addition--came from DirecTV CEO Chase Carey at an investor conference.

"It gave us an opportunity to capture value for the distribution we bring," he said.

Carey signaled that the satellite provider would continue to look "opportunistically" to leverage its ability to place a network in up to 16 million-plus homes to gain equity stakes or other financial advantages. "We create value for content."

Some cable channels, hungry for distribution in order to build audience and advertiser interest in their infancy, have been known to pay for carriage. It's unclear how widespread a swap of carriage-for-equity may be, although cable networks in which Comcast has an interest can receive greater access to its 24-million-home footprint.

Other Tennis Channel investors include the USTA, a slew of prominent venture capital firms, tennis greats Andre Agassi and Pete Sampras and marketing firm IMG.

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