ESPN 20 Pct Rate Hike Expected by Cable Operators

[Brett Ferino]

LOS ANGELES (Reuters) - Walt Disney Co.'s sports channel juggernaut ESPN is expected to announce this week a 20 percent rate increase, cable and satellite television broadcasters said on Wednesday.

The hike comes as operators are loudly protesting the cost of programming, especially ESPN, even though the network is considered crucial by many cable and satellite companies and the price increase is in line with past years.

SPN acknowledged that it would mail letters to customers on about Thursday with news of a rate increase that would take place on Aug. 1, but declined to comment on the amount.

Satellite television operator DirecTV, which is being taken over by News Corp. and just finished a battle with Disney over the cost of its ABC Family channel, confirmed the extent of the expected hike.

"It's like taxes. It's their annual 20 percent increase," said spokesman Bob Marsocci. He said his company would pay it despite opposing it.

"We are going to try to aggressively reduce programming costs so that we don't have to incur double-digit rate increases," he said.

Two cable operators which declined to be identified also said they expected a 20 percent hike. Industry sources said ESPN contracts typically allow the channel to raise rates up to 20 percent annually, and for years it has chosen the maximum.

COSTLY CUP OF COFFEE?

For cable and satellite operators, the cost is believed this year to amount to more than $2 per customer per month, which is many times what other channels cost.

ESPN says it lets operators run local advertisements and that doing so cuts the net cost of the increase by about half. It also argues sports are expensive to produce, and adds that the wholesale cost per subscriber is still nominal, while cable operators love ESPN sports.

"This is like a cup of coffee a month. They (operators) continue to rate us the most important program to their cable systems," ESPN spokeswoman Katina Arnold told Reuters.

New York's Cablevision recently ended a standoff over broadcasting New York Yankees baseball with a temporary agreement that limited the operator's cost for the channel.

Cable operator Cox Communications Inc. has been a vocal opponent of sports costs, which Chief Executive Jim Robbins on March 13 said had contributed to more than half the 12 percent increase in programming costs the company faced last year.

"Under the law, we can pass the entire cost of programming on to our customers -- but what businessman in his right mind would hike prices by double digits every year?" Robbins said.

"They charge us outrageous prices, and Cox has to deliver the bad news to consumers."

Operators gathered at a Kagan World Media conference in New York on Wednesday also bemoaned sports costs.

Rocco Commisso, chief executive of cable operator Mediacom Communications Inc, said Disney, which reports quarterly earnings on Thursday, was making up for tough times at other units, such as cruise ships plagued by passenger illness, and theme parks.

"My customers should not have to subsidize the fact that Disneyland parks aren't filled with customers, or the fact that they had to disinfect their cruise ships," Commisso told the conference. (Additional reporting by Kenneth Li in New York)

[ks]

Eh, that's not cool.






ks