December 11, 2003
An acrimonious brouhaha is afoot between the cable giants at Cox (NYSE: COX ) and sports powerhouse ESPN, a subsidiary of Disney (NYSE: DIS ) . At issue are the rates that Cox pays ESPN for the right to broadcast its various channels on Cox networks.
Cox, whose contract with ESPN runs out in March, claims that ESPN requested a carrying cost increase of 20%. ESPN denies this, insisting that its hike was well below what Cox has publicly stated. George Bodenheimer, ESPN president, calls the ongoing negotiations "standard operating procedure," but allowed that it is odd that Cox opted to go public with its complaints.
Here's what you're seeing: Two more-or-less monopolists beating each other up over pricing. There are other sports networks, including Fox's (NYSE: FOX ) , but ESPN dominates the genre. A cable system without ESPN has a much harder time attracting the extremely valuable young male segment and might lose subscribers to alternatives like Hughes' (NYSE: GMH ) DirecTV, or Dish Network, from Echostar (Nasdaq: DISH ) .
For its part, ESPN can't attract viewers on platforms it isn't on. Loss of Cox, one of the nation's largest cable companies, would be painful.
Still, ESPN looks to have the upper hand. Other sports networks have certain broadcast rights, but ESPN's rights to the National Football League, National Basketball Association, College Basketball, National Hockey League, and Major League Baseball is unrivaled. ESPN is as near a default as exists in programming, and losing it even for a time could be devastating for Cox.