New York -- Mediacom Communications Corp. chairman Rocco Commisso wasted
little time shifting the conversation to high programming costs at Tuesday's New
York Cable Club luncheon honoring him, calling for programmers to tie the rates
they charge operators to their ratings.
Commisso said video revenue for the cable business has gone up 50% in the past 10 years, while revenue for programmers has risen sixfold in that same time
frame.
"It would be OK if certain programming services would go up and down," he
said. "I can't live with everything going up. Because I don't believe that every
service, year after year increases the share of the audience, so why should that
rate go up?"
Commisso gave special attention to ESPN, which has been under fire since
announcing a 20% rate hike a few months ago.
Commisso said one channel -- ESPN -- charges what amounts to between 4% and
5% of Mediacom's total revenue. "That's a huge cost," he added.
ESPN said it does not believe ratings reflect the total value of its
networks, but its ratings are up substantially over the past two years.
"In 2002, we had 18 of the top-20 highest-rated programs on ad-supported
cable TV, and we enhanced our programming even more with high-rated products
like [the] Wimbledon [Championships] and the NBA [National Basketball
Association]," an ESPN spokeswoman said in a prepared statement.
"ESPN is No. 1 in upscale male delivery and the No. 1 ad-supported network
among men," she added.
ESPN also disputed Commisso's claim that programming costs increased six
times while MSO revenue has only doubled.
"We don't know how he can draw that conclusion," the ESPN spokeswoman said.
"Our read of Mediacom and industry published reports clearly suggests that
operators have healthy businesses and a very positive economic outlook."
She cited Federal Communications Commission and industry reports stating that
between 1998 and 2002, industry revenue from basic and expanded-basic
subscriptions and related local ad sales grew by more than $8 per subscriber,
per month while license-fee payments to programmers for expanded-basic
programming grew by less than one-half that amount.
"There is clearly a disconnect between this reality and Rocco's self-serving
comments today," the spokeswoman said.
Commisso also lamented that in the past, large cable operators that acquired
systems saw their programming rates decline with additional scale, but when he
doubled his subscriber base to 1.6 million in 2001, his programming rates went
up.
"Somewhere in between, there has got to be an answer," he said.
Commisso added that one of those answers could be tying programming costs to
ratings.
"If your ratings go up, you've done a good job, then you should be paid
more," Commisso said. "But if your ratings go down, you're paid less. You
certainly can't have both."
The Mediacom chairman, who has been one of the most outspoken critics of
programmers recently, said he took on the mantle mainly as a defensive move. But
he added that he would not look for further regulation of the cable
business.
"The government already is in my business," Commisso said. "I'm not going to
Washington asking for reregulation. But when the government says to me `Your
rates are too high,' I have to defend myself. That's when things get hairy."
One thing Commisso would like to see on the regulatory front, however, is the
rescinding of the retransmission-consent laws, especially in light of the
pending merger between News Corp. and DirecTV Inc. parent Hughes Electronics
Corp.
Commisso said his biggest fear is that News Corp. chairman Rupert Murdoch
will use retransmission consent for his Fox broadcasting network to push hefty
rate increases for his other cable networks.
"Retransmission consent wasn't put in place to help Rupert Murdoch and his
satellite," Commisso said. "It was to make sure that independent broadcasters
don't get shut down."
