Wait 'Til Next Year: When Will Comcast and The Big Ten Network Reach an Agreement?

by Thomas Paschalis April 3 2008, 17:12

I. Introduction

When the college footballs season kicks off in August, Midwestern cable customers may finally get the chance to see what all the fuss over the Big Ten Network (BTN) is about.  After over a year of tense negotiations, published reports indicate that the BTN and Comcast are nearing a deal to air the channel on the Midwest's largest cable provider.[1]  Upon becoming the first conference to announce the creation of its own cable station, the Big Ten counted on the appeal of being able to guarantee its fans the ability to see nearly every game played by conference teams.[2]  When negotiations commenced with Midwest cable providers, however, Comcast and its competitors balked at the BTN's high asking price and broad distribution demands.[3]  The ensuing stalemate prevented most Midwest fans who do not have satellite cable from viewing the much-anticipated Ohio State-Wisconsin football game in November.[4]  Additionally, the Wisconsin-Indiana and Wisconsin-Purdue men's basketball games in February were also unavailable to most fans within the Big Ten region.[5]

Months of public sparring between the BTN and Comcast seem to have finally given way to a compromise.  As major sports leagues are trending toward cable broadcasting, the anticipated agreement between Comcast and the BTN is sure to impact fans and cable customers nationwide, while setting a precedent for future contractual negotiations between cable providers and athletic leagues.

II. The Dispute

When the BTN launched its first broadcast on August 30, 2007, most of the major cable carriers in the Big Ten region did not carry the network.[6]  Comcast has nearly six million subscribers in the Midwest, and is the dominant cable provider in five of the Big Ten's eight states (Illinois, Indiana, Michigan, Minnesota, and Pennsylvania).[7]  Charter Communications (Wisconsin), MediaCom (Iowa), and Time Warner (Ohio) also do not carry the BTN, though Big Ten officials think the impending agreement with Comcast will pressure the holdouts to follow suit.[8]  Currently, satellite providers DirecTV and Dish Network, along with 40 smaller cable companies are the only providers of the BTN to fans in the Midwest.[9]

The two sides have long disagreed over the price and distribution of the network.  BTN officials wanted to charge subscribers nearly $1 per household per month and have the station included on the extended basic cable package.[10]  Comcast strongly disagreed with the notion that all subscribers should have to pay for the BTN.[11]  Comcast officials, citing that Big Ten teams reside in only eight states, called the BTN a "niche" channel that belongs on its sports tier, which subscribers must pay an extra $6.95 per month to receive.[12]  A Wisconsin telecommunications professor agreed with Comcast, calling the BTN "greedy and anti-consumer."[13]

In the proposed compromise, Comcast has backed off its plans to put the BTN on the sports tier.[14]  Reportedly, the BTN will be available on the basic package for more than 90 percent of Comcast subscribers, while those on the fringes of Big Ten territory will only have it available on the sports tier.[15]  While some consumers appear to have switched providers in order to get access to the BTN, it is unknown whether there was enough movement to pressure Comcast into the agreement.[16]

III. Legal Precedent

While insiders close to the negotiations think the framework is in place, most observers feel that it could take weeks or months for lawyers on both sides to work out the details.[17]  Presumably, both parties want to avoid legal battles similar to the ongoing litigation between Comcast and the NFL Network.  In a scenario very similar to that involving the BTN, the National Football League (NFL) formed its own cable network and contracted with Comcast for its distribution.[18]  Subsequently, the NFL Network filed a breach of contract suit when the cable provider removed the station from the basic cable package and placed it on the sports tier.[19]  Although the lower court granted summary judgment to Comcast, the New York Court of Appeals reversed the decision and ruled the case must go to trial.[20]  Comcast believed it had the conditional right to switch the NFL Network's status based on the language of the preliminary agreement and subsequent contract.[21]  The Court of Appeals, however, examined the documents and found the language on the matter to be ambiguous.

The feud between the NFL Network and Comcast expanded when the cable company filed a separate suit against the network in December 2007.[23]  In the new action, Comcast claims that the NFL Network has breached the contract by allegedly instituting a marketing campaign aimed at convincing cable subscribers to switch from Comcast to other providers.[24]  Litigation on this new suit has yet to commence.

IV. Conclusion

In the aftermath of the NFL Network dispute, Comcast has undoubtedly placed a greater emphasis on negotiating and drafting clearer contracts.  Of equal importance is the effect that the BTN deal will have on future talks between cable providers and athletic leagues.  If and when the current proposal is consummated, other leagues that desire to start their own cable networks will certainly demand placement on basic cable.  Even with the BTN agreement as a template, lawyers on both sides will be expected to spend extra time to expressly assert detailed constructions of performance and remedies within the contract.  Thus, even if future negotiations are less hostile, the process could still be lengthy.

From a consumer's perspective, putting new sports networks on basic cable will likely result in a rate increase to all subscribers, whether or not they are sports fans.  While BTN proponents argue that cable subscribers already pay for many channels they do not watch, the problem is more acute with sports channels because of the relatively high prices they command.  At the very least, the prolonged dispute between Comcast and the BTN will make leagues cognizant that they cannot expect to impose their terms on cable companies.

The BTN saga has also compelled at least one league to seek an alternate method of increasing exposure.  This past season, the Horizon League, an NCAA mid-major conference, formed the Horizon League Network (HLN).[25]  The HLN broadcasts all conference men's basketball games free over the internet, and league commissioner Jonathan LeCrone states that over 500,000 people have viewed the broadcasts as of mid-February.[26]  LeCrone says that the HLN gives the conference the ability to offer all of its games to the public at a fraction of the price the league would pay to put a handful of games on cable networks.[27]  Additionally, the league maintains the flexibility to schedule its games simultaneously, whereas the BTN forces the league to stagger all of its starting times so there are no broadcast conflicts.

Offering a broadband service like the HLN should appeal to smaller leagues and viewers alike, at least as long as it is being offered for free.  The success of the HLN gives other leagues a cheaper option to consider, and may affect the balance of bargaining power between leagues and cable companies.  If future negotiations mirror the same level of hostility as felt between Comcast and the BTN, expect entrepreneurial leagues to explore broadband service as a viable alternative to a cable channel.

Sources

[1] Teddy Greenstein, Comcast, Big Ten Network Close To Deal, Chi. Trib., March 1, 2008, available at http://www.chicagotribune.com/news/chi-11-btn-chicagomar11,0,732376.story.

[2] Id.

[3] Id.

[4] Ed Sherman, Big Ten Network, Comcast Continue Battle, Chi. Trib., Feb. 8, 2008, available at http://www.chicagotribune.com/sports/chi-08-sherman-big-ten-networkfeb08,1,2085942.story.

[5] Id.

[6] See Greenstein, supra note 1.

[7] Id.

[8] Id.

[9] Associated Pres, Big Ten, Comcast Battle Over New Network's Costs, ESPN, June 21, 2007, http://sports.espn.go/com/ncaa/news/story?id=2912394 (last visited March 22, 2008).

[10] See Greenstein, supra note 1.

[11] Id.

[12] Id.

[13] Id.

[14] Id.

[15] Id.

[16] Id.

[17] Id.

[18] NFL Enter. v. Comcast Cable Commc'n, 851 N.Y.S.2d 551, 553 (Ct. App. 2008).

[19] Id.

[20] Id. at 551-552.

[21] Id. at 552-553.

[22] Id. at 555.

[23] Peter Lauria, Comcast Suit: NFL Network in Breach, N.Y. Post, Dec. 15, 2007, available at http://www.nypost.com/seven/12152007/business/comcast_suit_nfl_network_in_breach_167667.htm.

[24] Id.

[25] Kyle Whelliston, Horizon League Becoming a Bigger Player in Tournament Scene, ESPN, Feb. 12, 2008, http://sports.espn.go.com/ncb/columns/story?columnist=whelliston_kyle&id=3242164 (last visited March 22, 2008).

[26] Id.

[27] Id.

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