Friday, September 07, 2007

Cox & UL Athletics

Cox has rolled out the first really big shot in the upcoming war with LUS; KATC and a post to the Independent blog reveal that it has spent two million dollars to purchase:
...exclusive rights to telecast replays of coaches programs, sporting events and university athletic programs on any of its cable systems, affiliated regional sports channel or programming network.
In the land of marketing this is a big deal...a very big deal.

The contract also includes, less importantly in my judgment, some pointedly described fiber connectivity and renaming/branding rights. Look to see "Cox" perpended to "Ragin' Cajuns" on buildings, shows, the scoreboard and wherever fine UL products are sold.

On the ground in Lafayette it means that Cox can control the video marketplace for UL sports. If you want to watch endless reruns and postgame analyzes of UL sports you'll have to subscribe to Cox. In a city where the successful pro fiber grassroots organization emblazoned all its advertising with the red and black it's one more element in Cox's campaign to overcome the anti-Lafayette label it was tagged with during the fiber referendum. (Cox has shown an acute awareness of LUS' local advantage in ways large and small; from hiring the locally connected daughter of the sitting governor to make its announcements, to sponsoring dinners for the local black chamber, to, now, grabbing the Ragin' Cajuns aftermarket. Cox understands that their prior behavior has created their largest marketing problem—and they're doing what they can to counter that history.)

What's LUS to do? There's very little that they can do. This is one of the places that Cox's size and financial reach make a direct answer impossible. Cox supplies cable to all of Acadiana and can distribute the cost of this purchase over every cable system they own in the region. [The red blobs at the map on the right; click map for a larger version] No single-city provider, no matter how loyal a booster of the university, can afford to match what Cox can afford to pay if the university makes it into a bidding war for an exclusive contract. And, anywhere Cox is not competing with an alternative wired provider, they can take a little cost off the top by leasing it to that non-competitor.

The Backstory: The feds
They will not have to provide this programming to anyone that they don't want to—and in Acadiana that means Cox will not sell it to LUS or the satellite companies. This sort of tactic has a pretty long history especially up east there have been bitter complaints against cable companies that secure exclusive rights to regional sports programming and refuse to resell it to competing wireline overbuilders (like LUS) or to satellite providers as a way of controlling the fan base.

It may (or may not) surprise you to know that this sort of thing was almost outlawed a year ago. The omnibus telecomm bill, that was only derailed when the net neutrality issue blew up unexpectedly, called the tactic anti-competitive and would have ended it. Cox is taking a bit of risk—a two million dollar risk—that the current congress won't casually outlaw the practice. The short version of the story is that locking new competitors out by using regional sports loyalties is pretty clearly anti-competitive. [How long is this contract? No one seems to say. KATC tells me that the period is a lengthy 10 years of exclusivity...$200,000 dollars a year.] And sports fans are the sort who, rightly, get upset and complain when they understand that their local loyalties are being exploited for the business benefit of media machines. They'd like to get it declared anti-competitive and illegal.

In fact it has been outlawed for any satellite-provided material. The satellite companies successfully lobbied to force vertically integrated media conglomerates that owned both television or movie programming and cable companies to sell critical programming at a reasonable price. That is why DirecTV can buy HBO programming (which is owned by Time-Warner cable) for a reasonable price. But the tool that the feds used to regulate it was satellite feeds—the big cable companies only had to sell it to satellite companies if they used satellites to distribute the feed. The idea back then was that the only reasonable way to distribute serious programming was via satellite uplink and downlink so distributing the feed to satellite companies would be trivially easy. However, in order that the cable companies wouldn't have to mess with demands to redistribute the many little shows that were locally produced shows (like those shown on AOC) that were transfered to regional affiliates over wire were excluded from the rule.

That made sense then. But things change and the rise of the gigabit internet has now made it feasible—and in some instances cheaper—to send massive amounts of video over the backbone, especially if you own regional fiber. (You can bet that AT&T won't bother to invest in lots of little satellite download dish farms as it rolls out its video services.) The UL deal exploits is what is known in the trade as "the terrestrial loophole." As long as cablecast regional sports "networks" (the tiger network, the ragin cajun network) use landlines to transfer the programming to local cable providers they can cut anyone out of the deal that they want.

But all that it would take to close that loophole would be the stroke of a legislative pen.

This is (another) one of those moments when Lafayette cannot simply go its own way and pursue its own interests. The federal legislature should act on issues like this and push the FCC, which under this administration, and frankly the last several administrations, has shown no inclination to police the media megacorporations that are the field on which modern politicking is played out. In a brief moment of irony Lafayette's best hope for gaining access to UL programming is the hope that AT&T and Verizon will be successful in their ongoing lobbying to close the terrestrial loophole.

UL?
The real question for me is: What is going on with UL? Cox is easy to understand. But UL has to understand that it is taking advantage of an opportunity that the people of the Lafayette community have created. Without the looming threat of competition from LUS Cox wouldn't bother to pay much for a product that no one else was in a position to sell. Cox could have given UL a couple of million anytime it wanted to in the last decade or so—and didn't. It is not generosity that motivates them. Cox chooses to do so today because it is looking for a way to staunch the inevitable bleeding that will begin the moment a popular locally-owned competitor rolls out a competing video product. But from UL's point of view they had to choose between 1) an exclusive, very lucrative contract with Cox this year that will, in all likelihood, result in limiting viewership by the 50% in their hometown that choose to buy from LUS and 2) Two non-exclusive contracts two years down the road--both likely well above what they're getting now but likely not equal to the pot that Cox is offering now--that would serve the entire loyal fan base they've developed in their hometown. The choice was between cash and developing their local fan community.

The University opted to trade cash for loyalty. It's probably a good business deal. But is doesn't serve the fan community—or other local university loyalists—well.

If you thought the horse farm deal and a determination to sell off that property before a new president arrives showed a lack of community of awareness bordering on hostilty toward Lafayette on the part of the outgoing Authement administration, the Cox deal will only confirm your suspicions. A new university administration can't come soon enough for Lafayette.

Update 8:10: I ran down an announcement of the deal on the ULL website. It's remarkable for two things—one which does and one which does not appear:
  • 1) What is absent is any mention of what this 2 million really bought—which I've argued was the exclusive replay rights for all ULL's athletic programs and after-show commentary. (Is someone embarassed? And if so, is it Cox or ULL?) and
  • 2) Cox repeats the silliness of describing its hybrid fiber-coax network as its "fiber network." Tain't so; and a lesson in what a fiber network really is is coming soon.

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