As football season approaches, the cable industry is gang-tackling the fledgling NFL Network created by the powerful National Football League.
Comcast subscribers in Utah and across the nation have had the NFL Network yanked from their homes as part of a bitter battle. The NFL tried to stop Comcast Corp., the country's largest cable operator, by suing, but lost. The case is now on appeal. Since the ruling, Comcast says it has moved the NFL Network to a sports tier in all of its systems where it is available for an additional charge.
Other cable Titans — Time Warner Cable Inc. and Cablevision Systems Corp. — are refusing to carry the NFL Network, which originally debuted in 2003, on much friendlier and more favorable terms for the league. Even Charter Communications Inc., whose controlling shareholder owns the Seattle Seahawks, stopped carrying the network in late 2005 because of a contract dispute.
At the heart of the debate: how much pro football is enough for America's already robustly served TV fans. The NFL, which has long been able to command top dollar by packaging its games myriad ways, says viewers are still insatiable. But after years of budgetary woes caused by the skyrocketing cost of football, cable executives say they — and viewers — have had enough. Die-hard football fans can now watch as many as 16 regular-season games a week via broadcast, cable and satellite operators.
Complaints about the cost of cable, driven in large part by the cost of sports, have been escalating. "Not all our customers are passionate sports fans," says Steve Burke, Comcast's chief operating officer. "And many of them are not interested in paying more" for football programming. In New York City, roughly 20 percent of an average customer's standard cable bill goes to sports channels, regardless of whether the customer watches them.
Cable executives say the NFL finally got tripped up by its arrogance. "They believe no matter what they do, you have to have it," says Fred Dressler, who was Time Warner Cable's lead negotiator on programming before he retired late last year. The NFL network says it is currently available to 44 million homes, although Comcast says the figure is millions less than that; at least one team owner expected the number to be closer to 70 million.
It doesn't break the hearts of cable executives that the man quarterbacking the struggling NFL effort is Steve Bornstein, whom they largely hold responsible for the high cost of football. Prior to the NFL, Bornstein headed Walt Disney Co.'s ESPN unit and honed its strategy of paying the league large sums to broadcast football games — and then charging cable companies massive fees to carry ESPN.
Bornstein insists demand for additional football programming is strong and the NFL Network is performing as expected. "To me the glass is half full," he says. Indeed, viewership of over-the-air television broadcasts of NFL games climbed every year between 2003 and 2006, and this year's Super Bowl, which aired on CBS, ranked as the third-most-watched program in U.S. TV history.
Feeling it has fans on its side, the NFL retaliated with "an email blast" and a Web site (www.iwantnflnetwork.com) accusing the cable companies of "unsportsmanlike conduct." "Some cable companies are penalizing you — forcing you to pay more to watch football or blocking the games completely," it continues, asking visitors to switch to satellite, complain to their cable operator or contact government officials.
Cable's rebellion represents a rare setback for the NFL. Considered the gold standard of sports programming, the league now earns $3.7 billion in fees annually by selling games to the likes of ESPN, NBC and CBS. That's more than the National Basketball Association, the National Hockey League, Major League Baseball and Nascar combined.
In the middle of this maelstrom is 55-year-old Bornstein, a tall, swaggering executive with a reputation for hardnosed tactics at the bargaining table. In a New York Post interview, Bornstein once described operators who don't offer the NFL network as "brain dead." Now he jokes about how that quote got him in trouble.
While he can be charming, Bornstein does little to discourage his tough-guy image, former employees and business executives say. Hanging in his office is a quote from a conversation he once had with heavyweight fighter Mike Tyson. "Steve," the quote reads, "everyone has a plan until they get hit."
In 1987, Borstein and ESPN stunned the sports world by buying the rights to eight NFL games per season in a three-year, $153 million deal that helped forge "Sunday Night Football," a regularly scheduled game televised nationwide. The cost of the deal, plus a healthy margin, was passed on to the cable companies. Eleven years later, Bornstein outdid himself by agreeing to pay the NFL $4.8 billion in an eight-year deal. That one deal eventually helped ESPN jack up its rates to cable companies 20 percent annually for several years.
The strategy was hugely profitable for ESPN — and a major headache for cable and satellite operators. Today, cable companies pay ESPN more than $3 a month for every household that gets the signal, compared to 30 to 50 cents for popular cable networks like CNN and MTV.
The NFL, meanwhile, struck oil with its programming packages. First there was Monday Night Football and Sunday Night Football, which expanded the offerings beyond the typical two Sunday daytime games already available. In the 1990s the NFL hit pay dirt again by selling "Sunday Ticket," a package that allows viewers who pay a fee to watch up to 14 games every Sunday, to satellite TV operator DirecTV Group Inc.
After a stint at Disney, Borstien was drafted by the NFL, which had been mulling the idea of creating its own network. After watching ESPN ride the popularity of their games to huge profits, NFL owners thought they could sell programming to cable and satellite operators directly.
Although the network initially didn't have any regular-season games, it still got off to a good start. With Bornstein acting as a consultant, the NFL convinced DirecTV to broadcast the NFL Network to all 11 million of its subscribers in exchange for continued exclusive rights to Sunday Ticket.
Cable operators have long coveted Sunday Ticket as well, but the NFL has preferred to limit it to DirecTV, fearing wider distribution would upset broadcast-television customers who pay so much to air their Sunday games.
Bornstein was named president and CEO of the NFL Network in early 2003. But he ran into problems with cable companies, which have long been annoyed with the NFL over Sunday Ticket and for driving up the cost of ESPN. Executives at some cable companies griped that the NFL's Network's price of 15 to 20 cents a subscriber was too much for a network then focused on second-tier programming like preseason games, highlights and historic footage.
From day one, Time Warner and Cablevision played it tough, scoffing at Bornstein's warnings that they would lose subscribers to satellite TV if they didn't carry the NFL Network.
The NFL Network regularly got top Nielsen ratings in its time slot among cable networks when it aired regular-season games last year. But viewership of those games still falls far short of Monday Night Football, the other nationally televised game on a cable network. Also, the NFL Network usually doesn't crack the top-40 cable-network shows of the week during the offseason.