Time Warner Cable-MSG Fee Fight Knocks Knicks, Devils off Air

January 02, 2012, 7:15 PM EST By Alex Sherman and Jody Shenn

Jan. 2 (Bloomberg) -- Time Warner Cable Inc. subscribers won’t see today’s New York Knicks basketball and New Jersey Devils hockey games on Madison Square Garden Co.’s networks, a result of the programming-fee standoff between the companies.

Time Warner Cable’s 2.8 million MSG subscribers lost access to the channels after an agreement lapsed at 12 a.m. yesterday. MSG and Time Warner Cable are fighting over the rates the network is paid for allowing broadcast of its content.

The cable company told subscribers in a broadcast message yesterday that they could still watch some of the hometown teams’ games on other channels, while MSG Media President Mike Bair said that would be small consolation.

“Sports fans are passionate about their teams,” Bair said yesterday by e-mail. “They do not want some of the games, they want all of the games. They want comprehensive pre- and post- game shows and they want to watch MSG’s award-winning coverage of the Knicks and our other teams.”

The haggling over prices underscores the tension in the pay-TV industry over the cost of sports shows. If the dispute continues through this month, 15 of 17 Knicks games and 9 of 12 New York Rangers hockey contests will be affected, according to MSG.

Programs scheduled on the MSG or MSG Plus channels today include a game between the Knicks and Toronto Raptors at Madison Square Garden in New York and the Devils’ match with the Ottawa Senators, their website shows. Fans would miss a New York Islanders hockey game tomorrow and a Knicks-Charlotte Bobcats contest on Jan. 4.

‘Refused to Negotiate’

“We had a deal within reach earlier this year” offering a 6.5 percent rise in prices to MSG, Mike Angus, a Time Warner Cable senior vice president, said yesterday in an e-mailed statement. “MSG reneged on the deal and instead, demanded a whopping 53% increase and refused to negotiate further.”

Bair called Time Warner Cable’s claim that his company is seeking a 53 percent price increase a “gross mischaracterization.”

No progress in the negotiations was expected on New Year’s Day, Alex Dudley, a spokesman at New York-based Time Warner Cable, said yesterday in an e-mail.

MSG has urged the company’s customers to switch to Verizon Communications Inc.’s FiOS or DirecTV to get access to its networks.

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.

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.

Time Warner Cable is betting few customers will cancel after losing 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.

8 Million Subscribers

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 a regulatory filing. MSG Co. also owns Fuse, which was a factor in the negotiations. Time Warner Cable dropped Fuse last month.

Heads of pay-TV services, including Time Warner Cable’s Glenn Britt, DirecTV’s Michael White and Dish Network Corp. Chairman Charlie Ergen have all lamented the role of sports in rising cable bills.

Time Warner Cable CEO Britt told the Wall Street Journal last month that sports networks should be sold separately from basic cable to lower bills for customers who don’t care about athletics. MSG and MSG Plus are part of the expanded basic package on Time Warner Cable, the second-largest U.S. cable service.

--Editors: Christine Maurus, Sylvia Wier

To contact the reporters on this story: Alex Sherman in New York at asherman6@bloomberg.net; Jody Shenn in New York at jshenn@bloomberg.net

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

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