RSN Model: TWC’s Witmer Says It’s Changing, Not Broken

The decision-making process before choosing to carry a network—like, say, Time Warner Cable SportsNet —is far more complex than it was just 24 months ago, distribution heavy hitters said Thurs at the Covington & Burling Sports Media & Technology presented by SportsBusiness Daily/Global/Journal. “In the case of the Lakers, in the case of all the deals we’re looking at, we take a much harder look at the choices we’re making,” said AT&T content & ad sales pres Jeff Weber. It used to be about just taking the content, but now viewership, usage and, most importantly, intensity of viewership influences whether a distributor picks up a network—or decides to stop carrying one. Ratings especially matter when they’re attached to fans who will leave you if you don’t have the product, said Melinda Witmer, Time Warner Cable‘s evp & chief video and content officer. No surprise that she took the defensive on comments DirecTV‘s Mike White made recently, in which he deemed the RSN structure “broken.” “The system’s broken, and it’s a mess when it’s not their product,” she quipped, declaring that DirecTV -owned Root Sports costs more than what TWC is asking for Time Warner Cable SportsNet. DirecTV and DISH are still without deals for the Lakers RSNs, while AT&T, TWC, Cox, Verizon, Charter and Bright House are carrying it. But with video subs declining, the overall ecosystem is challenged, at the very least. “Can the revenue continue to go up and margins continue to shrink? At some point that stops working,” Weber said. “Sports rights are on the front lines. Things will need to be different… The trends aren’t sustainable.” However, the multichannel business is still a “shockingly successful product,” Witmer said. “Broken isn’t really the right phrase. Things are changing.” Part of that change may mean developing programming online prior to coming to linear TV. “You don’t have to get to cable to start a business,” she said, suggesting that first building an audience online makes more sense. Indeed, some channels on cable are an “inefficient buy” and “may well do better in an online environment.” (Networks with contracts expiring with TWC soon should re-read that last sentence again!) The process might help the big guys, too. “It’s a big opportunity for major media companies to create their own start-up labs that way,” she said. In the meantime, networks will continue to bid on sports rights—and perhaps some distributors will follow in TWC’s footsteps and cut out the middleman. AT&T bid on the Lakers, Witmer reminded Weber, to which he replied: “We stopped when it got crazy.” To stay in the game, the middleman has to create value, said Fox Nets distribution pres Michael Hopkins. That may mean “providing distribution for teams that perhaps can’t do it” or offering scale to the leagues, he said. TWC doesn’t expect to buy every set of rights it can get its hands on, but it “would certainly consider opportunities,” Witmer said. The Lakers were a necessity. “No matter who had the rights, we were going to buy it,” she said, and the purchase has allowed the MSO to “have greater control over our destiny.”