It sounds so simple. Own a team. Start a network. Count your riches. Or better yet ? own both and pay your accountants overtime. The lure of vertical integration is strong ? a few cable operators are playing that game and doing quite nicely, thank you. But of course, it's anything but easy to pull off. That's why George Steinbrenner brought in the biggest gun he could hire ? Leo Hindery Jr. ? to launch a network with the legendary Yankees as its drawing card. That's why Tom Hicks, owner of the Texas Rangers and Dallas Stars, backed off from starting his own network, banking instead on the reported $500 million offered by Fox Sports Net. And that's why Paul Allen, still lacking a critical deal with AT&T Broadband, won't see his Action Sports Cable Network succeed until that deal happens. It's not just the strategy or the economics. It's the ability to win over MSOs. Here are the regional networks vying for more cable-subscribing sports fans.
ACTION SPORTS CABLE NETWORK
ASCN is on the leading edge of high-definition television ? 25% of its production is high definition ? and boasts what may be the lowest subscriber fee of any sports regional network. But the Portland, Ore.-based net can't be seen locally, even though owner Paul Allen also owns the NBA Portland Trail Blazers. Launched last July, ASCN has 300,000 subscribers but no deal with AT&T Broadband's 560,000 Portland-area cluster. ?We keep trying to find a common ground where it will work for both of us, and we haven't reached that point yet,? says ASCN EVP Harry Hutt. ?We just haven't reached an agreement on price,? confirms Lindy Bartell, communications director for AT&T Broadband in Portland. ?We're looking at it for digital because it's niche programming, but we're willing to put it on standard for the right price.? The network's success hinges on AT&T, both for license fees and for advertising revenue. Current spot rates range from $200 to $1,000; full distribution would mean a higher CPM and a better sell-through rate. Hutt says the network costs well under 85 cents per subscriber ? the lowest fee he knows of any regional sports net. ASCN may be a bargain, says Michael Thornton, DirecTV SVP-programming acquisitions, but it's ?also got the least amount of professional product out there. Does one team make a network?? Allen's parentage doesn't give it a break, either; Charter Communications announced last week that it would test HDTV this year, but not in Oregon.
COMCAST SPORTSNET
Comcast more than doubled its reach ? to 8 million ? when it acquired the Home Team Sports network last year. Now its two branded sports networks are siblings with a twist: Comcast-Spectacor owns the Philadelphia-based network as well as the Philadelphia 76ers and the Philadelphia Flyers and the arenas they play in, while Comcast has no stake in the teams whose games air on Comcast SportsNet Mid-Atlantic, which serves Baltimore and Washington, D.C. ?You're certainly aware that you're one company and you have synergies,? says Jack Williams, president of Comcast SportsNet. Another key difference: Comcast protects its Philly sports net from satellite carriage, which is not the case farther south. Both networks plan to add high-definition programming as Comcast Cable rolls out the service. And both nets produce significant programming around the games. In Philadelphia, that starts with a 6 a.m. sports highlights show and ends with a half-hour of news at 1 a.m. ?We're making an effort to truly become the destination for sports in our areas,? says Williams. It also may serve as the template for a postmerger AT&T Comcast ? a recent federal filing mentions applying the Comcast model for regional news to AT&T, which owns 50% of Fox Sports New England.
EMPIRE SPORTS NETWORK
By 1998, the NHL's Buffalo Sabres were bleeding $1 million a month and were on the verge of splitting town. As the other major pro franchise in a city devoted to the NFL Bills, the Sabres needed money and a little local loving. Enter Adelphia founder and chairman John Rigas, who assumed the team's multimillion-dollar debts and spent more than $40 million to acquire 100% of the team. ?If the Rigas family had not stepped in and bought the Sabres, the Sabres would have gone bankrupt or left town,? says Bob Koshinski, VP and GM of Empire Sports Network, the Adelphia-owned regional sports network that shows most of the club's games. Rigas also saved ESN, whose fortunes ride on the Sabres. The network, which reaches 1.5 million households in New York state, pays a reported $1.6 million per year to air the hockey games while sharing in the sponsorship and advertising revenues. The Rigas clan, whose patriarch grew up near Buffalo, breaks ground this fall on a high-rise near the Sabres' arena. The complex includes an ESPN Zone-style bar to serve as a pre- and postgame studio for Sabres broadcasts.
FOX SPORTS NET
Over the last decade, News Corp. has snapped up the rights to dozens of pro baseball, basketball and hockey teams and has access to many more through its partnership with Cablevision's Rainbow Sports arm. The upshot: FSN now counts 27 MLB, 26 NBA and 23 NHL teams on its roster. Unlike regionals, the success of which can hinge on the season record of one or two teams, Fox now enjoys true economy of scale. ?It doesn't really matter if we have 14 down and 16 up in one league,? says FSN president Tracy Dolgin. ?We're going to have most of them or all of them. It's not very relevant to us if one market is up [or] one market is down.? The regional empire building is paying off: As national sports ratings dip in most areas, FSN is seeing double-digit growth in all three major sports, Dolgin says. FSN recently canceled its national sports news show but continues developing national programming to keep viewers between games ? good news for the independent sports nets that use FSN to shore up their schedules.
NEW ENGLAND SPORTS NETWORK
The $700 million blockbuster deal that switched ownership of the Boston Red Sox to a group including producer Tom Werner and the New York Times Company also gave Werner & Co. 80% of NESN, described by some as the package's real crown jewel. (The other 20% is owned by the Boston Bruins.) NESN's switch last year from premium to basic on AT&T Broadband and Cox (plus Charter and Adelphia in some areas) sharply increased the 18-year-old network's value. Instead of tens of thousands of subscribers at $10.95 a month for a premium channel, the network's coffers swelled by tens of millions in annual revenue thanks to a sub fee estimated at $1.40 a head. (NESN officials declined to comment.) Just AT&T's 1.5 million subscribers in its 3.6 million sub count alone add up to more than $25 million annually. Werner plans to expand postgame programming and air town meetings with fans, among other changes.
SUNSHINE NETWORK
It isn't often that a sports network takes pride in showing collegiate women's softball games. But in sports-mad Florida, the Sunshine Network is committed to local sports and fans of the state's universities like the University of Florida and Florida State. Sunshine's coverage ? it is seen in 5.5 million homes ? distinguishes itself from the competition, although Fox Sports Florida is a competitor in name only as Sunshine, like FSF, is owned by Fox. At the beginning of this year, Fox upped its stake in Sunshine from 43% to approximately 92%; the remaining 8% to 9% is held by local ? and mainly independent ? cable operators. (Fox Sports Florida, meanwhile, is available throughout the state, except in Orlando.) When Fox Sports cut its nightly newscast and many local broadcast networks pared down their own sports news segments, Sunshine seized the advantage. It now offers two news shows each night, with a staff of 30 full-time anchors and reporters. Even when Fox Sports offered news, it had only three reporters in Florida, and the newscast originated from Dallas.
RAINBOW SPORTS/MSG/FSNY
It's been a tough year for this cluster of sports networks. Rainbow's five networks and the two operating under MSG axed their ambitious regional sports reports to save money during the sharp advertising downturn. Then there's the little matter of the marquee team that got away ? the Yankees ? and the subsequent decision to split the Mets between FSNY and Cablevision's MSG Network. And News Corp. must decide by December whether it wants Cablevision to buy back its interest in the networks. But it's not all gloom for the Dolan family's cable sports franchises: The Chicago Blackhawks are bringing a smile to the Dolans these days.
YES
George Steinbrenner's bid to reap even greater benefits from his ownership of the New York Yankees finally had its opening day last week. YES's broadcast debut wasn't exactly glitch-free, but the network has time to get it right before baseball's opening day on April 1. But so far it looks like Cablevision's customers won't be watching ? unless the MSO gives up its battle to put the network on a premium tier and signs on at $2 a subscriber. If it doesn't, analyst John Stone of Ladenburg Thalmann predicts that 90,000 Cablevision customers will follow the Yankees to DBS. That's not really a victory for YES CEO Leo Hindery Jr., given that YES needs Cablevision's 3 million subscribers to hit a home run with advertisers. Despite launching the new network in six months, Hindery is taking some hits in the press ? among his former cable operator brethren no less. He says he feels ?totally comfortable? with his efforts to bring the new network to as many Yankees fans ? including those in Cablevision's ranks ? as possible. His comfort level on opening day could depend on the Dolans.
Will Lee contributed to this story.
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