Broadband Cable Association of Pennsylvania


December 11, 2012

DirecTV has imposed a new "regional sports fee" on new customers in parts of the country, highlighting how the rising costs of sports programming is raising the price of pay TV packages.

The satellite TV operator in late summer began adding the new fee of about $3 a month to the bill of new customers that subscribe to a channel tier above basic entertainment packages. The fee is only being added in markets like New York and Los Angeles, where multiple regional sports networks broadcast games of several major teams, a DirecTV spokesman said. Consumers who don't want to pay the new fee will have to settle for DirecTV's lower-tier packages, which come without the sports channels and various other channels such as the Cooking Channel and Fuse, a music channel.

A spokesman for DirecTV said the new fee "is a way of recovering some, but not all, of the skyrocketing cost of sports in certain markets." The spokesman said that the "vast majority" of new customers still opt to buy the TV packages with regional sports networks, despite being informed of the surcharge. Disclosure of the fee comes amid an intensifying debate about rising sports costs in television. In the past year or so, several media executives from cable and satellite firms and some other entertainment companies have complained that steep fees charged by sports channels are forcing up prices that consumers are charged for pay TV. That in turn is raising worries about consumers disconnecting their pay TV subscription, or cutting the cord.

DirecTV, which has prided itself on being the premiere sports entertainment provider, has been particularly vocal about regional sports networks, channels available only in certain regional areas which broadcast games of local teams. In a November conference call with analysts, DirecTV Chief Executive Mike White said that "the regional sports network structure in the industry is broken." He complained that network owners were bidding up rights to games and then passing on the higher costs in increased programming fees. In recent months, high-profile sports networks like the Pac-12 Network, which carries sports content from the Pacific-12 Conference of colleges, and Time Warner Cable Inc.'s Lakers networks in Los Angeles have negotiated to gain carriage with big pay TV operators, including DirecTV. The satellite provider has not yet agreed to add Pac-12, and is attempting to negotiate a lower price, or for customers to "buy the network separately or purchase individual games on demand," according to a statement on its website.

DirecTV was one of the last major providers to agree to carry Time Warner Cable Lakers network, and new DirecTV subscribers in the L.A. market will be subject to the new sports fee. DirecTV itself owns three regional sports networks in Denver, Seattle and Pittsburgh, but the sports fee won't apply in those markets because multiple networks aren't operating in those areas, a DirecTV spokesman said. Wall Street Journal

Some of Netflix's biggest fans don't even have a credit card. Luckily for the Internet video company, their parents do. With a dedicated children's portal, recently bolstered by a theatrical deal with Walt Disney, Netflix is solidifying its place as a go-to network for young kids. For parents, Netflix offers a commercial-free collection of age-appropriate content, viewable on televisions and tablets alike. For Netflix, children offer a captive audience that generally cares less about the newness of programming, allowing the company to serve them content that typically costs less.

But Netflix's popularity with children could be a double-edged sword. Analysts say the streaming service could be undermining the very companies that supply it with most of its children's television content, namely Disney and Viacom. Using TiVo data, Sanford C. Bernstein found ratings for the kids' cable genre were up 8.5% year-over-year in the first quarter among those who didn't stream content and only 0.4% among those who did. Disney ratings grew 11% for nonstreaming users and 6% for streaming users, while Viacom ratings grew 6% for nonstreaming users and only 2% for streaming users. Bernstein says those trends have persisted through the year. And looking at an individual network tells the same story. From the end of 2011 through August 2012, ratings at Nickelodeon were up 11% among nonstreamers, compared with only 3% among streamers.

Netflix launched its "Just for Kids" page in August 2011, allowing children to click on the likes of "Thomas the Tank Engine" and "Dora the Explorer" to watch shows and movies featuring that character. They can also scan through movies and shows organized into genres such as "superheroes" and "princesses." At the time, Netflix said almost half of its members in the U.S. and Canada had streamed at least two movies or shows for kids in the past 90 days. Netflix hasn't updated those figures. But its deal with Disney, which analysts estimate is worth at least $300 million a year, shows it values children's content. For Viacom, which has seen ratings sag at Nickelodeon even as it continues to sell shows like "SpongeBob SquarePants" to Netflix, the data raise the question of whether such deals make sense.

Both Netflix and Viacom maintain that Viacom's ratings issues are unrelated to Netflix. And, indeed, there are likely other factors at work, including Nickelodeon's overreliance on a small number of now-fading programs and more competition from other channels. Still, the data suggest Netflix has played a material role. In contrast, Disney Junior and Disney XD ratings are rising. But both channels are relatively new and are coming off a small base. And even there, Netflix appears to be having an effect. For Netflix, the risk is that Disney and Viacom demand significantly more for children's content to make selling it worthwhile. In extremis, they could even decide to stop selling it to the streaming company. If Netflix gets too popular with kids, it could find fewer content companies playing in its sandbox. Wall Street Journal

NBC adopted the peacock as its logo in 1956, replacing a xylophone bearing the letters N, B and C with a striking mallet, as part of the switch to color TV. In recent years the peacock has also been used by cable channels within NBCUniversal, NBC's immediate parent, such as MSNBC and CNBC. Comcast, the biggest cable operator in the U.S., acquired control of NBCU early last year. NBC is one of Comcast's highest-profile businesses but it is relatively small in the scheme of things. Broadcast television, which also includes NBCU's Spanish-language network Telemundo and the company's TV stations, accounted for 2% of Comcast's operating profit and 13% of revenue in the nine months through September. The new Comcast logo incorporating the NBC peacock will gradually replace the old corporate logo on Comcast's service trucks, print and TV advertisements and customers' cable bills, the spokeswoman said. "Xfinity" will remain the cable unit's brand for its products, including TV, voice and Internet. "The peacock is one of the most recognizable brands in America, and if you look at the iconic peacock with the modern new font for Comcast, it brings together the whole concept of media and technology," the spokeswoman said. The logo change also comes as Comcast is set to turn 50 years old next year. Wall Street Journal

Facebook said it fixed an outage that left some users unable to access its social network while the company made a change to the site's infrastructure, following a separate disruption at Google Inc. earlier today. "We made a change to our DNS infrastructure, and that change resulted in some people being temporarily unable to reach the site," Alexandra Hollander, a spokeswoman for Menlo Park, California-based Facebook, said in an e-mailed statement. "We detected and resolved the issue quickly, and we are now back to 100 percent." Google, owner of the most popular Internet search engine, also had to restore service to some users after its Gmail e-mail services were disrupted this morning. In a Web posting, Google said at 9:30 a.m. San Francisco time that it was investigating reports of an issue with Google Mail. At 10:10 a.m., the company said the issue had been fixed. "System reliability is a top priority at Google, and we are making continuous improvements to make our systems better," the Mountain View, California-based company wrote. Bloomberg