Cox Nears Deal With Fox, Renews Talks With ESPN

Cox Communications' ongoing battle with pricey sports networks may be easing, with the company close to renewing a carriage deal for six Fox regional sports networks and ESPN showing signs of softening its rate demands.

On Thursday, Cox and ESPN executives met in Atlanta. ESPN has been seeking a five-year deal with a 20% annual hike (or a 12%-16% annual hike if Cox agrees to carry a variety of new products). Cox offered a much reduced counterproposal in August but had never gotten a response.

Until last Thursday. According to Cox, ESPN expressed willingness to accept a "more moderate" rate plan but offered no new numbers.

"We feel it is important to take a stand on the issue of rising sports programming costs and how it impacts our customers' bills," Cox COO Pat Esser said. "Please don't lose sight of the fact, we want to carry these networks but at a reasonable cost to our customers."

Cox's parallel fight with Fox Sports has been less prominent and nasty. But the Fox Sports time bomb was ticking louder. Cox's ESPN affiliation agreement doesn't expire until April, but its Fox Sports deal expires Dec. 31. The MSO was ready to tell its customers this week Fox Sports might go dark at year-end. Now it won't.

Terms of the Fox deal aren't final, but Fox Sports backed down from early demands for a 35%-plus hike in license fees. The final deal is moving toward an average annual increase of 7%-9% over the five-year contract: a relatively large step up in year one, smaller hikes in the next four years.

Cox President Jim Robbins has been on a jihad over escalating programming costs, particularly the expensive sports networks. ESPN charges $2.65 per subscriber monthly; Fox regional nets regularly secure $1.50-$2.25. By comparison, Nickelodeon—which gets the highest total-day cable ratings—gets around 45¢.

Cox and Fox traded public barbs over their negotiations during a September investor conference, but things calmed down as Fox distribution chief Lindsay Gardner and Cox programming buyer Bob Wilson negotiated further.

Cox is also agreeing to some carriage of Fox Sports' extreme-sports startup Fuel and Fox Cable's 50%-owned National Geographic Channel, but it's not clear how much of that would be on lucrative analog tiers and how much would be on more narrowly distributed digital tiers.

One big sticking point is retransmission consent of Fox Broadcasting O&O stations. Cox wants to do one big deal, resolving both cable and broadcast issues. It isn't clear whether Fox will go along.

Cox's retransmission-consent with Fox deal expires in March. Three years ago, negotiations hit the wall, and Fox yanked its Cleveland, Washington and Dallas stations off Cox systems, which serve 425,000 subscribers, and threatened to do it in more cities. The blackout lasted five days, with Cox ultimately agreeing to carry Fox Movie Channel and Fox Sports World.

Just prior to last week's apparent détente, ESPN stepped up its attack on Cox, launching a Web site, which declares that "Cox Cable wants to rip ESPN from your basic-cable lineup." That was accompanied by newspaper ads in Cox markets like San Diego and New Orleans.

Cox responded with newspaper ads of its own: "We will do everything in our power to keep ESPN available to you at a reasonable price."