Cablevision Builds Sports Tier With Yanks Leading Off

BY MAVIS SCANLON Cablevision’s one-year deal with the YES Network to air 130 Yankees games beginning March 31 lifted a cloud hanging over Cablevision’s stock and should stem customer defections to satellite. If the two companies cannot come to a long-term agreement by Feb. 1, 2004, Cablevision CEO James Dolan and YES Chairman Leo Hindery Jr. agreed to enter binding arbitration. The framework for future negotiations, as well as the legalese of the temporary agreement, has yet to be hammered out. Cablevision will pay YES a license fee of about $2 per subscriber per month, but only for those customers who want the sports service. That is a victory of sorts for Cablevision. Over the course of a very public, yearlong feud, YES had demanded that Cablevision carry the network on a basic programming tier, with a license fee for each Cablevision customer. Still, the additional license fees as agreed upon will add millions to Cablevision’s overall programming expenses. The dispute itself highlighted the escalating tug-of-war between programmers and operators, who are loath to pass higher programming costs on to customers, yet are reluctant to absorb them. After terms of the deal were released Thursday night, analysts reduced estimates for Cablevision’s cash flow growth. Lara Warner, an analyst at Credit Suisse First Boston, estimates Cablevision’s programming expenses will increase by about $20 million in 2003 as a result of offering YES for free to customers who already take premium packages, and by $27 million in 2004 if the same deal carries through. Cablevision will market YES three ways. Customers who already subscribe to premium programming packages that include sports networks MSG and Fox Sports Net New York — Cablevision counts 1 million customers in this category, including digital customers — will receive YES at no extra cost. The MSO will also create a regional sports programming tier, including YES, MSG and FSNY, for a combined monthly price of $4.95. And third, each sports network will be offered on an a la carte basis, for $1.95 a month. To create the separate sports tier, Cablevision will remove MSG and FSNY from its Family Cable expanded basic programming package, but will offer rebates to customers for the loss of the channels. The rebate programs are still being worked out. The deal also includes a provision that calls for Cablevision to cover losses incurred by YES if other operators in the area, including Time Warner Cable and Comcast, move YES to a separate tier. It is unclear if those operators will make such a change this year with opening day weeks away. Cablevision declined to comment on the provision. Mark Harrad, a spokesman for Time Warner Cable, said it was too early to determine if TWC would seek to change its deal with YES. “We are trying to understand the implications of the deal to see if it has any impact on our deals going forward.”
With Staci D. Kramer.