Digital growth paves cable path to Big Ten Network

Jeff Richgels  —  8/23/2008 5:50 pm

Cable subscribers' increasing embrace of digital services helped lead to a carriage deal between Comcast and the Big Ten Network, and could do the same for Charter Communications and Time Warner, Wisconsin's two dominant cable providers.

BTN from its beginning insisted on being carried on a basic level of cable service -- such as Charter's Expanded Basic -- in the Big Ten Conference states in order to reach a maximum number of subscribers. BTN has since made a partial concession on that point in its deal with Comcast that was driven by the company's growth in digital subscribers.

In its markets in Big Ten Conference states, Comcast will carry BTN on its expanded basic level from its launch Aug. 15 through the end of the 2008-09 college basketball season. But after that, it will be allowed to move BTN to a "broadly distributed digital level of service in most of its systems in the Big Ten states," the companies said in their news release announcing the deal.

(Outside the Big Ten states, Comcast can put BTN on a digital sports tier immediately, a position BTN has agreed to from the beginning.)

BTN President Mark Silverman told The Capital Times this week that BTN's position has not been about the tier of service, but instead about how many subscribers the network reached.

When BTN started last year that necessitated a basic level of service in the Big Ten states. But that has changed as tens of thousands of cable customers have been moving from basic analog levels to digital to get advanced services like high-definition TV and video on demand (VOD), as well as discounts from bundling digital cable with high-speed Internet and phone services.

Comcast, for example, now has more than two-thirds of its total customers and about 80 percent in the Big Ten states taking digital, according to multiple media reports.

That meant Comcast can move BTN in at least some Big Ten markets to digital and still meet the specific number of subscribers agreed to in the deal, Silverman said in a phone interview.

"They're guaranteeing us that the vast majority of their subscribers will be getting the network," he said. "It's really that simple."

He emphasized that the deal will not allow Comcast to put BTN on a sports tier that costs extra in the Big Ten states.

Silverman said the same principals apply to other cable companies.

"If we can get (enough subscribers) via a mix of expanded basic and digital down the road" that's acceptable, he said. "We just want broad distribution. That is our focus."

Cable companies closely guard their subscriber numbers and Charter declined to comment on its percentage of digital customers, but like other cable companies it has been reporting losses of analog and strong growth in digital subscribers in its quarterly financial reports.

And that trend is expected to continue, and perhaps accelerate, with the switch to digital broadcasting in the U.S. next February.

"That should really be the last giant surge of customers moving finally from analog to digital," said Barry Orton, a UW-Madison professor of telecommunications who follows cable issues closely. "A lot of people will be junking their old TVs for new digital ones and getting digital service."

Silverman said he thinks having the Comcast deal done will help BTN gain deals with Charter and Time Warner.

"I think if you can get a deal done with the biggest company in the country -- one that had been previously the most antagonistic -- it proves there is an ability to get something done," he said. "We look forward to negotiating with Charter and we hope to be engaging with them very soon."

Although he wouldn't put a percentage on the chances of gaining a deal with Charter before the University of Wisconsin's first football game Aug. 30, Silverman said he believed there was "plenty of time to get a deal done before football season."

Orton remains doubtful that BTN and Charter can get a deal done that fast, but said they have strong incentives to get it done "because one more fiasco like last season and the egg on the face of the (UW) athletic department and the Big Ten is hard to wash off."

He added that if the deal gets done in time for the Big Ten conference games "they've saved themselves from the fiasco."

Charter spokesman John Miller reiterated that the company didn't want to comment in detail on its negotiations to carry BTN, which is majority owned by the Big Ten Conference and minority owned by Fox Cable Networks.

"Our goal remains what it has been: to negotiate the best possible deal with them we can on behalf of our customers," Miller said in an e-mail.

BTN also has carriage deals with satellite providers DirecTV and DISH Network, as well as numerous smaller cable companies, including MHTC (formerly Mount Horeb Telephone Co.), which serves the areas of Mount Horeb, Blue Mounds and Dodgeville.

The Comcast-BTN deal took months from when the framework was reported to be in place in March.

"We've been close now for quite a bit and it was great to finally get all of the legal issues behind us and get the agreement finalized," Silverman said. "Months ago we really had the framework in place about the major parts of the deal -- cost and distribution. It was really kind of just understanding all the aspects of the new media element and how much product there was going to be for VOD (video on demand) and how was that going to work."

BTN said even before it launched last Aug. 30 that it was flexible on pricing so long as it got the carriage it needed to reach a maximum number of subscribers.

BTN has gotten as much as $1.10 per subscriber in some deals with smaller cable companies, but Comcast is paying 70 cents per subscriber, according to multiple media reports that BTN has declined to comment on.

Silverman did say the Comcast deal proved the network was "willing to be flexible in pricing."

BTN also has declined to comment on speculation that Fox made concessions to Comcast regarding its other properties in order as part of the BTN deal.

Although the length of the Comcast-BTN deal hasn't been released, it reportedly is for seven to 10 years. Silverman said the deal was long-term and Comcast subscribers wouldn't have to worry about possibly losing BTN anytime soon should a renegotiation go sour.

The Comcast deal will nearly double the number of homes that can access BTN, from 30 million to 55 million. In the eight-state Big Ten footprint, the number will surge from 6.5 million to about 13 million. Comcast has markets in all of the Big Ten states except Iowa. Comcast's Wisconsin territory is in the northwest portion of the state.

Silverman also said that BTN is likely to carry about the same number of UW football games this season as last season, as the process for deciding which networks cover which games has not changed.

Last season, five UW football games were telecast by BTN: non-conference games against Citadel and Northern Illinois, and conference games against Ohio State, Indiana and Minnesota.

BTN gets about half of all Big Ten football games, including about 40 percent of conference matchups. It has a guarantee of one conference game for each Big Ten team, which led to the Badgers' huge game against Ohio State last season being on BTN.

Silverman said the telecast details for the first three weeks of the season -- all non-conference games -- will be announced soon.

Once the conference season starts, ABC will get the first pick each week, ESPN will get the second and third picks 75 percent of the time, BTN the second and third picks 25 percent of the time, and BTN the remaining games each week.

Jeff Richgels  —  8/23/2008 5:50 pm