Friday, August 19, 2005

Smelling like roses?

As expected, yesterday, the NHL and Comcast announced they had reached an agreement for Comcast's OLN cable network to be the exclusive national cable broadcaster of NHL games in the U.S.

Going over various stories, here seem to be the details of the deal:

  • The agreement is for two years, with the NHL having an option for a third. Though neither side is commenting, most media outlets cite their sources telling them it's worth $65 million, $70 million, and $72.5 million. There are also OLN options for fourth, fifth, and sixth years, with varying levels of compensation, depending on the network's subscriber level.
  • OLN will carry at least 58 regular season games and as many as 78, the All-Star game, and extensive playoff coverage until game two of the Stanley Cup final, when NBC will take over coverage.
  • They will be broadcasting games on Monday and Tuesday nights (the idea being to create "hockey nights"). This will mean they will go head-to-head with Monday Night Football, which moves to ESPN next year.
  • Comcast intends to beef up the production of the games, as expected. Preliminary plans include miking players, in-game interviews, and an increased number of cams, including ones positioned in unique spots.
  • Digital cable subscribers will have access to on-demand video highlights and archival footage during games.
  • Comcast has committed to carrying at least one game a week in high definition, a medium many industry insiders point to as being most beneficial to hockey (Mark Cuban among them). One problem: OLN does not have an HD channel. As of now, Comcast says the plan is to do a game in HD and make them available to it's affiliates and distributors.
  • The two sides plan to collaborate on an NHL Network (similar to the one launched in Canada a few years ago, I assume), somewhere down the line. As you would expect, it will be 24 hour hockey coverage, eventually broadcasting games. Comcast has two years to put this network together. If they cannot, they must pay the NHL $15 million.
  • Comcast, which is the number one Internet broadband company in the U.S., has committed to streaming games live on the Internet.
  • The NHL intends to put on at least one outdoor game a year as part of the agreement.
So what does this all mean? Is this good?

Well, yes, and no. But the positives seem to outweigh the negatives.

In Comcast and the OLN, the NHL has a bonafided partner who seems enthused at the idea of being their broadcasting home. Unlike with ESPN/ABC, and before that Fox, all of whom seemed to regard the NHL more of a liability than an asset, they appear to be eager to help grow the game, because as it grows, so does the fledging network that's hitched it's wagon to the league. OLN President Gavin Harvey told the Associated Press that the NHL would be the "cornerstone of the network".

However, the fact remains, it's still OLN. It's not ESPN. They're in an estimated 30 million homes less. It's not even the other top tier cable networks they were supposedly talking to - the Spike TVs and TNTs of the world. They all have brand awareness that OLN does not.

How many of you truly know where OLN is on your dial? And if you do, how many know so because they had to find it when this story first began to leak a few weeks back? Be honest now.

But even though it may be an enigma to those of us who haven't been following the Lance Armstrong story beyond the morning paper headlines and who aren't hunting/fishing enthusiasts, OLN is still backed by Comcast. A financial giant if there ever was one. So, rest assured, they will pull out quite the marketing bonzana to make sure those of you who don't know about OLN do.

Financially, the NHL seems to be getting the last laugh. Back in June, when they announced they would not be picking up their $60 million option on the NHL deal, ESPN said that they didn't think the package was worth even half that. Less than six months later, not only has the NHL proved that wrong, but they managed to get a bigger deal. Don't think that that doesn't make Gary Bettman smile.

So you might ask, why? What does Comcast know that ESPN, apparently, didn't? According to one TV industry follower, simply math. It's believed that Comcast will be able to make back much of their payout by being in a position to increase the fee of carrying the OLN network. Comcast says their deals with many cable outlets expire at the end of the year. Currently, it is only in an estimated 60 million homes, almost 30 million less than ESPN. As Sports TV consultant Lee Berke tells the Philadelphia Inquirer, if they can an extra $0.10 per subscriber from the cable companies, at almost 60 million subscribers, that's $6 million a month and $72 a year in revenue. All before selling a single ad.

For a league that, two months ago, many thought would have to take a deal similar to their NBC one - meaning, a very small rights fee (if one at all) with a piece of the profits - a $200 million three-year agreement has them coming out like big winners.

Comcast's positioning as a rival to the ESPN juggernaut has been discussed to death, but it's worth mentioning here. In addition to their successful run with the Tour de France cycling race, they've also scooped up the America's Cup yacht race from ESPN. It's expected they will make a run at the NFL's Thursday-Saturday game deal, as well as the NASCAR package. ESPN's Major League Baseball deal expires at the end of this season. And they're about to launch a New York Mets network.
The reality is that ESPN couldn't have matched the Comcast offer. Nevermind the finances, but all the synergy Comcast can provide is out of their league. Having said that, perhaps had they treated the league better over the years (ESPN reps still say they had a healthy relationship with the NHL. Riiight), the NHL wouldn't have gone running into their rivals arms so enthusiastically. The darts their head Mark Shapiro threw when they didn't pick up the option, about the low value of the NHL, had to sting those in the league, and put the desire to shove it up their ass right at the top of their priority list.

A few years from now, the folks in Connecticut might be kicking themselves for not realizing what they had all those years. The phrase "you don't know what you got 'til it's gone" seems to be applicable.

POSTSCRIPT: Shortly after posting this, I got an email from someone in Canada (Ottawa no less) asking what this means for the OLN we get on this side of the border. As best I can tell, the answer is a mystery. Bell Media owns half of the Canadian OLN. They also own TSN, who own the exclusive cable rights to national NHL games. A few weeks back, the word was Comcast had hoped to work something out with TSN and CBC for some kind of agreement that would allow Canadians to see the games. If I had to guess, I'd say such a deal won't be worked out and they will be blacked out up here. But we shall see.

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