Cox Communications’ statement regarding comments by Peter Chernin, COO of News Corp. and Fox Entertainment Group, and Bob Iger, President and COO of The Walt Disney Company, at today’s Goldman Sachs “Communacopia” conference

In his presentation at the Goldman Sachs conference in New York today, Cox President and CEO Jim Robbins discussed the difficulties faced by cable operators in response to dramatic increases in programming costs, particularly sports networks ESPN and Fox Sports. As a result of today's media interest, Cox would like to clarify some of the statements made and key points regarding this issue:

  • Fox Sports has proposed an overall 35% rate hike in 2004 for Cox's carriage of Fox's regional sports nets in 11 cable systems representing about 3.3 million customers. Combined with ESPN's annual rate increases in excess of 20%, the pressure on cable providers is tremendous and poses serious implications for the value of cable TV to consumers.
  • Cox believes strongly that the average expanded basic cable package of about 80 channels for about $40 per month is a good value for cable customers. However, the value is becoming increasingly difficult to maintain in the face of the increasing cost of sports programming.
  • ESPN and Fox Sports together account for 32% of Cox's total expanded basic programming costs, versus only about 8% of expanded basic viewing.
  • If ESPN continues its increases at the current trend, that network alone will cost over $10 per customer per month in less than 10 years. It already costs more than the seven top-rated cable networks combined.
  • The solution is for ESPN and Fox Sports to moderate their price increases to more reasonable levels, to lessen the harm to customers. If they can't keep prices reasonable, the networks should allow cable companies to place their networks on an optional tier. (Current carriage agreements forbid cable companies from placing these networks on a tier.)
  • Mr. Chernin stated that the 35% increase Mr. Robbins cited applies only to Cox's Phoenix market. That statement is incorrect. In actuality, Fox's own written proposal calls for a 50% increase in Phoenix. Further, in some affected markets, the increase for 2004 is far higher - up to 181% in one Cox market representing about 200,000 customers.
  • To reiterate and clarify: Fox Sports' proposal calls for an average 35% increase for 2004 across all affected Cox markets, and an annual increase of 13% when averaged over the five-year contract.
  • If you consider the cost of the two additional networks that Fox would require Cox to carry in order to receive the proposed rate, the increase is actually much higher: 47% for 2004 and an average of 18% a year over the five-year contract. The bottom line is the cost of Fox's regional sports networks would increase 67% between 2003 and 2008.
  • Cox is asking for the flexibility to create a digital tier for the most expensive sports networks, if those networks refuse to lower their price increases, not a la carte pricing as Mr. Iger suggested.

Mr. Iger further questioned why Cox is "out there on its own" in challenging the cost of sports networks. The reason is simple: timing and fairness. With our contracts for ESPN and Fox Sports expiring within the next six months, we must take a stand now to oppose contracts that call for large annual increases and diminish the price value of cable for our customers. We call on Mr. Iger, Mr. Chernin, and their companies, to join us in protecting the value of cable for American consumers by agreeing to more reasonable pricing for their networks.
 

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