Market Insight

Time Warner Cable blacks out MSG Networks

January 04, 2012

Harold Vargas Harold Vargas Senior Analyst, Television Media

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Regional Sports Network Madison Square Garden (MSG) Networks went off the air for Time Warner Cable (TWC) subscribers on 1 January after both parties failed to come to terms over carriage fee rate increases. According to TWC, the second largest cable provider in the US, MSG Networks asked for a 53 per cent increase in rates after initially agreeing on a 6.5 per cent increase earlier in 2011.

As a result of the impasse, about two million TWC subscribers in the New York metropolitan area are without access to many games from their state sport teams such as the NBA's New York Knicks. TWC is countering the lack of MSG programming by offering a month-long free preview of its digital sports tier package that costs $5.95 a month.

The dispute between TWC and MSG Networks is the first shot fired in 2012 as operators fight back against rising sports programming costs. This isn't the first time both parties have come to a stalemate. In 2005, service was disrupted for two months before both parties agreed to their most recent contract. IHS Screen Digest expects a similar outcome from this round of negotiations where Time Warner Cable will hold out until they receive a more favourable rate increase.

However, having the network blacked out for more than a few months may result in their customers defecting to operators that do carry MSG. TWC is walking a fine line between carriage fee costs and subscriber retention. Waiting in the wings are satellite provider DirecTV and IPTV provider FiOS. The latter operator being a threat TWC did not have to worry about in 2005, and who has already snapped up a significant amount of TWC New York subscribers.

FiOS is gaining a strong presence in the New York metropolitan area, and as of late last year, HD programming of MSG and MSG Plus became available to FiOS customers, which might prove to be an attractive alternative to fans eager to receive their favorite sports programming in the coming months. The stakes are high for both TWC and MSG Networks, but it's the customers who lose out on such disagreement as they will most likely end up paying higher fees. Worst case for the consumer would be a long term drought of MSG programming for TWC subscribers. TWC is facing a resolute partner which is currently feuding with Dish Network; both MSG and MSG Plus have been off the air since 1 October 2010.

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