Bloomberg News

Time Warner Cable Knicks Fans Lose MSG Network in Fee Fight

January 01, 2012

(Updates screen message in seventh paragraph.)

Jan. 1 (Bloomberg) -- Time Warner Cable Inc. subscribers lost access to the network carrying the New York Knicks and Rangers games following the expiration of an agreement with owner Madison Square Garden Co.

“We had a deal within reach earlier this year,” Mike Angus, a Time Warner Cable senior vice president, said today in an e-mailed statement. “Despite agreeing to the asked for 6.5% price increase on rates that MSG themselves deemed as fair market rates just last year, MSG reneged on the deal and instead, demanded a whopping 53% increase and refused to negotiate further.”

The haggling over prices underscored the tension in the pay-TV industry over the cost of sports shows. MSG Media President Mike Bair called Time Warner Cable’s claims “categorically untrue,” saying he didn’t know where the company was “getting its math from.”

MSG has urged Time Warner Cable customers to switch to Verizon Communications Inc.’s FiOS or DirecTV to get access to MSG. Time Warner Cable had 2.8 million MSG subscribers, primarily in New York.

MSG Co. is controlled by New York’s Dolan family, which also holds majority voting stakes in AMC Networks Inc., another cable programmer, and Cablevision Systems Corp. MSG Co. also owns the Madison Square Garden arena and Radio City Music Hall.

Cable Rates

Cable and satellite-TV operators pay more than $4.50 a month per subscriber for MSG and MSG Plus, according to researcher SNL Kagan. Walt Disney Co.’s ESPN, the most expensive cable network, charged an average of $4.69 a month in 2011 and will fetch $5.06 in 2012, Kagan said.

“We want you to know that while MSG is preventing you from enjoying their channels, other channels still carry your favorite teams,” Time Warner Cable told subscribers in a message on the channel. “Nearly 40 percent of the Knicks games and almost 30 percent of the Rangers games will still be available on your time warner cable lineup.”

MSG’s rates have increased more than 70 percent over the past five years, according to Kagan. Time Warner Cable was willing to pay 6 percent more in 2012, according to Melinda Witmer, an executive vice president, who said MSG sought “dollars more” than any other sports network.

MSG’s current deal with Time Warner Cable was signed in 2005, according to Cablevision regulatory filings at the time. DirecTV and FiOS have negotiated new agreements and agreed to higher prices, Bair said.

Time Warner Cable added 0.8 percent to $63.57 at the close in New York on Dec. 30 and lost 3.7 percent in 2011. MSG Co. rose 0.3 percent to $28.64 and was up 11 percent for the year.

Customers

Time Warner Cable was betting few customers would cancel if they lost Knicks and regional NHL games. The company said it would provide replacement programming, without being more specific.

Many Manhattan residents are unable to get satellite TV because tall buildings obstruct signals, and not all buildings are wired for FiOS or RCN Corp., a smaller cable provider that serves certain areas of New York City, according to David Joyce, an analyst at New York-based Miller Tabak & Co.

Counting other pay-TV systems, MSG network and MSG Plus have about 8 million subscribers, primarily in New York, New Jersey and Connecticut, according to the company’s 2010 10-K regulatory filing. MSG Co. also owns Fuse, which was a factor in the negotiations.

--Editors: Rob Golum, Nick Turner

To contact the reporter on this story: Alex Sherman in New York at asherman6@bloomberg.net.

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net


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