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The nation’s second-largest cable operator has developed a new programming model to deal with the regional sports network crisis.
Charter, which owns and operates Spectrum cable systems, will offer a lower-cost programming package without RSNs and league-owned networks starting in the third quarter.
Charter’s plan has it splitting its expanded basic service, Spectrum TV Select, into two packages: Spectrum Select Plus, which will include RSNs and other higher-cost sports channels like league-owned channels; and Spectrum Select Signature, which will not have those higher-cost sports channels.
The difference in cost, at least initially, is likely to be about $10 per month.
The idea is that with more flexibility in how they offer their programming, distributors such as Charter will be in a better situation to fight back against the cord-cutting trend.
RSNs and league-owned channels historically have fought against being placed on higher-cost tiers. But any move that preserves the cable bundle for a longer period of time — and, of course, the affiliate fee that comes with it — has gained some support.
RSN executives largely are pursuing a hybrid strategy where they are available on cable and satellite systems, while launching direct-to-consumer streams to attract fans who do not subscribe to a multichannel provider.
Charter’s plan allows for RSNs to pursue both strategies.
The idea of sports tiers has been in vogue among pay-TV distributors since the turn of the century. Cable operators and satellite distributors have used sports tiers as a way to offer high-cost sports channels to hardcore sports fans.
But sports tiers have never been popular, especially since they didn’t include any of the most popular sports channels. RSNs, for example, regularly boast the biggest viewership numbers in any market for their live games. But the RSNs all had deals that required they stay on the most popular tiers.
It’s taken several years and many torturous negotiations, but Charter executives have been changing those contracts to get more flexibility on how to sell RSNs to their customers.
As little as a decade ago, RSN contracts required that they reach 85%-90% of a distributor’s customer base. As Charter has renewed its RSN deals, it began lowering those guarantees, which has given Charter the flexibility to create a lower-cost tier without them.
Charter has renewed almost all of its RSN deals, affecting 85% of its footprint. The remaining ones have deals that come up over the next 14 months or so.
Only MASN has not agreed to the new deal terms. Spectrum recently dropped MASN in the Washington, D.C., area at the beginning of the MLB season. MASN holds the rights to Nationals and Orioles games.
To help ensure that the RSNs subscriber count doesn’t drop too far and too quickly upon the move to create a lower-cost tier, Charter plans to market the new tiers only to new customers or existing customers looking to change their programming package.
Charter also has told RSN and league executives that it will not roll out the new tiers unless all of the RSNs in a given market have agreed to the new deal terms.
As part of its RSN deals, Charter will make RSNs’ direct-to-consumer streaming offerings available to any customer who pays for the package that includes the RSNs. It also will sell those streaming services to broadband-only subscribers who do not take video.
National sports channels, like ESPN and FS1, will stay on the most popular expanded basic tier and will not move to the RSN bundle, though subscribers to the RSN bundle also will get ESPN.
John Ourand can be reached at jourand@sportsbusinessjournal.com. Follow him on Twitter @Ourand_SBJ and read his weekly newsletter and listen to his weekly podcast.
Editor’s note: This story is updated from the print edition.
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