Fox May Up the Ante More on NHL Rights

Fox Broadcasting Co. is leaning toward making a counteroffer to the Walt Disney Co.’s bid for television rights to NHL games, in an effort to at least drive up the costs that its archrival will have to pay.

Earlier this week, Disney made a $600-million bid for five years of exclusive coverage on its ABC broadcast network and its ESPN cable channels.

The offer is nearly three times what Fox and ESPN pay under their current contracts with the NHL, which expire at the end of the 1998-99 season. ESPN is paying $100 million over seven years for cable rights and Fox is paying $155 million for five years of broadcast rights.

As incumbent rights holders, Fox and ESPN can retain their packages by matching a new bid. According to one source, Disney is bidding about $250 million for the broadcast portion that Fox now holds and about $350 million to retain its ESPN cable package.

That means that Fox, which lost an estimated $1 million a game under its current contract, must match Disney’s $250-million bid to retain its broadcast rights.

Fox recently passed on its right to extend its contract by two more years. Some sources indicated that Fox was no longer interested in hockey because of low and falling ratings, but another executive said it let its rights pass so it could bid on the broadcast and cable rights as a package.

One reason for the low playoff ratings is that Stanley Cup games have alternated between ESPN and Fox, preventing either from promoting the competition as a mega-event.

Sources say Fox Television Chairman Chase Carey is particularly keen on damaging the cable stronghold of ESPN and its spinoff channel, ESPN2, which is reliant on hockey during prime time from October to April.

Fox has put together a constellation of regional sports cable channels, under the Fox Sports Net banner, to challenge ESPN’s domination by giving consumers a mix of highly rated home team games and newscasts that run across the entire network.

At the least, Carey is said to be eager to force ESPN to pay up for cable, alone, without the benefit of games on ABC that can be used as a promotion platform to build viewership for ESPN through cross-promotion.

Disney’s $600-million bid represents a 400% increase for the cable portion and only a 60% premium over the current broadcast contract.

Unlike broadcasters, who must rely solely on advertising to recover costs, cable networks can also charge cable operators higher licensing fees.

ESPN and the regional sports networks are the most expensive channels for cable operators, and their efforts to pass these costs along to customers have incited consumer anger and a firestorm in Washington. Although operators have debated putting sports channels in their own tier to spare the general public from having to foot the bill, contracts with ESPN prevent such changes.

Fox and the NHL are in disagreement over the company’s deadline to bid. Fox believes it has 10 days from the time it is informed by the league of Disney’s bid. Although it has been informed of Disney’s broadcast offer, Fox is still awaiting verification from the league of its cable bid to determine whether it can afford to present its own joint bid.