DODGERS—Dodger Fans Victimized by Fox, Time Warner Spat

Here’s one way to capitalize on a cable war. In case you hadn’t noticed, DirecTV has been aggressively targeting Time Warner Communications subscribers in the West Valley and across Southern California who have been affected by the on-going battle over fees imposed by Fox Sports Net that have resulted in a blackout of Los Angeles Dodgers games since late July. The digital entertainment service provider is now offering a dirt-cheap dish installation promotion, hoping to capture those Time Warner subscribers who, DirecTV is guessing, want to watch what few Dodger games are left in the season particularly if the team manages to stay in a pennant race. In turn, Time Warner has been running a 30-second commercial featuring testimonials from disgruntled satellite dish owners. It all boils down to money, naturally. But, depending on whom you ask, it’s either just pennies, or millions of dollars. In 1999, Fox Sports Net asked cable operators to pay a 21 cent-per subscriber monthly surcharge to pick up the Dodger telecasts. Fox Sports Net had bought the rights to an additional 40 games to add to the 40 it already had scheduled and said it was simply passing on fees it must pay its parent, Fox Entertainment Group, which also happens to own the Dodgers. Time Warner paid the fee. The company also paid in 2000 when the surcharge jumped a penny to 22 cents per subscriber, albeit reluctantly. But this year the cable company put its foot down when the fee jumped to 23 cents per subscriber and, for almost a month, its customers have been forced to look elsewhere for their Dodger fix. Fox says most of its operators here and across the country have agreed to pay the fees and, frankly, don’t know what the big deal is. But for Time Warner, this is bigger than the Dodgers; it’s an across-the-board attempt to halt the rising costs of programming it says it must pass on to its customers in the way of rate increases. Time Warner rate increases for this year took effect in January. This year, the rate for the basic package, which includes Fox Sports Net but none of the pay channels, went up 49 cents from $26.25 to $26.74. The increase includes the city franchise fees. Time Warner has also blacked out Houston Astro, Texas Ranger, Kansas City Royal and Pittsburgh Pirate games since July over the same surcharges, although the fees vary from market to market depending on the number of games offered, according to Lynn Yaeger, a senior vice president for Time Warner based in Stamford, Conn. Recognizing a golden opportunity for increasing its customer base, DirecTV is offering a free satellite dish, receiver and installation, with no long-term commitments to those Time Warner subscribers caught in the fray. Advertising began with radio spots in early July and kicked into high gear about 10 days ago with a massive doorknob-drop campaign to all Time Warner households. Time Warner won’t say how many households in the Valley that is, but Fox officials say the company has around 350,000 in Southern California. DirecTV’s manager of public relations, Marc Altieri, based in El Segundo, said it’s too soon to tell how many dissatisfied cable viewers have responded to the offer, but he claims calls to the “hot line” listed on promotional materials are increasing daily. “We went out to all Time Warner customers’ homes letting them know what we have and, if they are upset by the impasse, that we have an alternative,” said Altieri. “What I can tell you is that we have seen a huge increase in volume of calls to the phone number, which we created just for the situation. And we feel that the longer this goes on, the more responses we are likely to get.” Typical costs for DirecTV products and installation run between $150 and $200, he said. Altieri said DirecTV has roughly 10 million subscribers nationally, but he could not break out how many customers live in the Valley. Takers will still have to pay DirecTV a $24.95 shipping fee plus monthly programming costs, depending on what kind of service they choose. DirecTV’s monthly fee for a basic package, which includes Fox Sports Net, is $31.99. However, that does not include a $5.99 surcharge for access to local channels. Eric Brown, general manager for Time Warner Communications in Chatsworth, had little to say about DirecTV’s promotion except that it proves the cable industry doesn’t quite have the monopoly on the market many are led to believe. He added that what DirecTV does is fair game, but he advised those thinking of making the switch to read the fine print. “I think it’s testament to the fact that we are in a competitive marketplace now,” Brown said. “So recognizing the fact that people have a choice, I would tell you that the responses that I have received have been very supportive of the position we are taking of trying to continue to manage costs.” Brown said there have been “some encouraging signals” regarding ongoing negotiations with Fox, but declined to say what Time Warner was specifically asking for: a cut or a cap in the Dodger surcharges. “It’s not our policy to comment on programming contracts,” he said. According to Dennis Johnson, spokesman for Fox Sports Net, Time Warner is the only cable operator who has declined to pay the surcharges. He said Time Warner’s assertion that the fees this year alone would mean an additional $1 million in expenses for the company is misleading. He said Time Warner has positioned the fee as a 23 cent-per subscriber increase, instead of a 1-cent increase over the 22 cents it paid last year. With a 1 cent-per subscriber monthly rate increase for 350,000 subscribers (a figure Brown refused to confirm), the actual additional cost for Time Warner to broadcast the games this year over last is really about $42,000. “That’s a drop in the bucket, when you consider how big they are,” said Johnson. “They paid the fees last year, which were only one cent lower per subscriber, so my question is what are they doing with all that money that they aren’t paying for the Dodger programs this year.” Time Warner says Fox is wrong to characterize the dispute as one over pennies. “They are trying to belittle it as cents,” said Brown. “But when you add up all those markets, we are talking millions.” However, both Brown and Yaeger refused to say exactly how much Time Warner had paid out to date to cover the surcharges for Dodger games. “We simply won’t supply the breakdown of dollars that way,” Yaeger said. Brown also said Fox was misrepresenting the total amount of the surcharge, but refused to say what they were either, citing contractual agreements. Instead, he suggested Fox Sports Net has spent a bundle on its own advertisements about the rift, money it could have used to make a good-faith effort to end the standoff. “Remember, this is not a local issue, it’s not just here in Los Angeles,” said Brown. “It’s a nationwide deal, so even if I wanted to run (the games) tomorrow I couldn’t do it.” As for Time Warner’s “testimonials,” Brown said the ads began appearing “months ago,” and are indeed part of a strategy to undermine DirecTV’s efforts. “They are certainly designed to inform our customers about some of the fine print that you don’t find out about until later,” said Brown. “As an example, in this Fox Sports dispute, you pay a $5.99 surcharge just to get the local channels, but that’s not spelled out when you see the $31.99 ads.” Altieri said the surcharges for local programming are something both Fox and Time Warner should understand all too well, even if the comparisons are apples to oranges. Digital satellite operators fought for and won the right to pick up local channels about a year ago but, like the cable operator and the network affiliates, they too must pay fees for the privilege, which, you guessed it, are passed on to the consumer. “To compare what amounts to us as a nationwide expense representing a whole lot of money to broadcast a huge package of entertainment and news programming to a surcharge on Dodger games is simply ludicrous,” Altieri said.