Economics likely stunting growth of National Hockey League’s Centre Ice PPV package

A costly minimum monetary guarantee required by the National Hockey League for its NHL Centre Ice pay-per-view (PPV) package is likely the main reason why more distributors in Canada haven’t embraced it. Loosening carriage terms for the premium digital sports package would help at least one small cable operator compete for digital subscribers with heavyweight Bell ExpressVu LP. John Myers, general manager of Newfoundland community cable cooperative Community Recreation Rebroadcasting Service Association (CRRS TV), says he had to drop the package this year because he lost more than $10,000 offering it last year. But he worries that the decision will result in the loss of about 60 digital cable subscribers who subscribed to the package last year to rival satellite TV distributor Bell ExpressVu. He says NHL Centre Ice is economically unfeasible because of the minimum guarantee required by the NHL. Cable distributors negotiate carriage of the package through Viewer’s Choice, which owns the PPV rights to NHL Centre Ice in Canada, with Rogers Cable Inc. acting as the middleman. The minimum amount that CRRS TV had to pay iN DEMAND, which obtained digital cable rights for NHL Centre Ice in 1999, and the NHL was $19,000 for the 2001-02 season. Myers says CRRS TV’s minimum payment was based on its basic subscriber base of just under 3,000 subscribers. But it only has about 550 digital subscribers who can actually sign up for the package. Last year, just under 60 CRRS TV digital customers took the package at $199, generating just over $11,000 in revenue. Myers says CRRS TV had to price the package at around the same price point as Bell ExpressVu for obvious competitive reasons. During discussions to continue carrying the package, it became clear CRRS TV would have to charge about $315 per subscriber to break even with 60 customers. With the package priced at $199 – the rate charged by most distributors offering the package – CRRS TV would be paying a hefty premium for those subscribers, Myers notes. He was told in discussions that the premium shouldn’t be considered as high because CRRS TV could save its 60 NHL Centre Ice subscribers from migrating to satellite. "I don’t need to make money on NHL Centre Ice, but I can’t afford to lose that much," Myers tells Canadian Communications Reports, questioning why there is a minimum guarantee rather than a per subscriber fee as is the case under other PPV deals. Normally, the Canadian Cable Systems Alliance (CCSA) negotiates programming deals on behalf of its small cableco members, which includes CRRS TV, but doesn’t for NHL Centre Ice because a PPV licence is needed to offer the package. So, CRRS TV had to deal with Rogers, operating through the PPV licence of Viewer’s Choice. Rogers has a 24.9 per cent ownership stake in Viewer’s Choice, according to CRTC data. Ken Gelman, director of NHL Centre Ice and program development at the NHL, says the league doesn’t discuss contractual matters, but he does say that he’s open to discussions with small cable operators in the country. He adds that he has not heard directly from any small cableco on the matter. "We’d like to expand the reach of the package as much as we can. We’d also one day like to be on Shaw and Star Choice," he notes. Neither Shaw Cablesystems nor Star Choice Television Network Inc. offer NHL Centre Ice. Combined, the affiliates would represent a potential digital subscriber base of over 1.2 million for the NHL. Shaw and Star Choice do, however, offer PPV packages of Vancouver Canucks games to subscribers in British Columbia and the Yukon (Star Choice only) and Edmonton Oilers games to subscribers in Alberta, Saskatchewan and Manitoba. When Bell ExpressVu announced in September 1999 that it would become the first Canadian distributor of NHL Centre Ice, rival DTH operator Star Choice stated it preferred to add out-of-market signals to give subscribers access to more NHL games (CCR, Sept. 29/99). Chris Frank, Bell ExpressVu’s VP of programming and government affairs, who negotiated the first deal with the NHL, declined to comment for competitive reasons on the contractual arrangement that the DTH operator has with the hockey league. Bell ExpressVu announced in September that its initial three-year deal had been replaced by a new four-year deal. "There are differences between the two deals of a contractual nature, but nothing that the viewer would notice on the screen," says Frank. For competitive reasons, he won’t discuss if or how much money Bell ExpressVu is able to make off NHL Centre Ice, but he does say that the company has "tens of thousands" of subscribers taking the package. Last year, Bell ExpressVu came under pressure for automatically signing up NHL Centre Ice customers from the previous year without their explicit consent (CCR, Jan. 17/01). Myers questions whether even Bell ExpressVu can make money from NHL Centre Ice because of the terms of carriage. The minimum guarantee is on a sliding scale, and if Bell ExpressVu is paying based on its overall subscriber base, which now stands at over 1.2 million, Myers wonders how the satellite TV provider can make a profit. Rogers Cable is the biggest cableco offering NHL Centre Ice, which is available to the cableco’s digital customers in Ontario. "Among hockey fans, it’s very popular," says Michael Allen, Rogers’ VP of programming. "When you consider that it’s not an inexpensive product, it gets a pretty good following. That’s sort of impressive when you consider how much hockey is available generally (over-the-air)." Asked how many of its digital subscribers had signed on for the package, Allen responds, "It’s constantly changing because we’re growing our digital base so rapidly and we’re also selling the Centre Ice package."

Economics likely stunting growth of National Hockey League’s Centre Ice PPV package

News | 12/13/2002 5:00 am EST

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