The most cynical aspect of the government’s approval of the giant Comcast-NBC Universal merger this year was that everyone involved suspected that Comcast would try to misuse its newly acquired market power to hurt competitors, yet everyone pretended that the “conditions” imposed on the deal would keep that from happening.
The Santa Monica-based Tennis Channel has a message for the chicken-hearted Federal Communications Commission, which greenlighted the Comcast deal in January despite its doubts: We told you so.
As long ago as July 2010, Ken Solomon, the Tennis Channel’s chairman and chief executive, warned the FCC that Comcast was poised to run roughshod over independent sports cable channels by favoring its own sports programming, while using the power of NBC Sports as an additional cudgel.
He said he was speaking from experience: The Tennis Channel had already filed an FCC complaint asserting that Comcast kept it isolated on a little-watched sports tier while giving much better placement to the Golf Channel and Versus, two channels that compete with it for advertising — and which Comcast happens to own. Today that complaint is awaiting an imminent ruling from an FCC judge.
Comcast maintains that it based its treatment of the Tennis Channel on sound business principles, including the sport’s declining appeal to TV viewers. But the FCC’s enforcement staff agrees with the Tennis Channel that Comcast was really motivated to protect Golf Channel and Versus from competition, which violates the law and the terms of the merger approval.
In a filing in the case, the staff says the FCC should require Comcast to make the Tennis Channel available to subscribers largely on an equal footing with Golf Channel and Versus and slap it with the maximum fine in its power. That sounds harsh, but it’s really just the punch line to a joke about the milquetoast authority of the FCC. That maximum fine is $375,000. As the nation’s biggest cable firm, Comcast vacuums up that much in revenue every 31/2 minutes.
“This will be a test for the FCC,” Solomon told me recently in his office a few miles from the beach. “If we don’t win, the law is a dead letter. There is a point where the system no longer resembles a free market, and we’ve blown past it.”
A former executive at Universal, DreamWorks, Fox and Disney, Solomon talks with evangelical fervor about the Tennis Channel’s mission in general and its battle with Comcast in particular. The day we met, the channel’s live broadcast of the women’s year-end championships was playing on a flat-screen TV behind us, with commentary supplied by a team including tennis star Lindsay Davenport.
But the players were in Istanbul, Turkey, and the commentators were in Culver City, a consequence of the channel’s struggle to achieve the elusive critical mass of viewers that would provide it with the budget to do everything on location.
Even so, Solomon says, Tennis Channel today serves its roughly 30 million subscribers with perhaps the strongest lineup of any single-sport cable channel, including rights to every one of the top 100 tournaments in the world. Live coverage of the finals of the four Grand Slam tournaments (Wimbledon and the U.S., French and Australian opens) and some other big events belongs to other outlets such as NBC or ESPN, but in most of those cases Tennis Channel holds rebroadcast rights.
The channel was launched in 2003 by former Viacom and Universal CEO Frank Biondi and other investors to serve fans disheartened by the paucity of tennis offerings on television. Like other cable systems, Comcast bundled the channel with other single-sport channels such as the NBA and NFL networks to be marketed to cable customers as an add-on block.
That seemed like a decent idea then, but it’s been a flop. Solomon says that of Comcast’s 23 million subscribers, about 10% buy the sports tier, about the same as on other major cable systems.
By 2009, when it had upgraded its scheduled offerings and assembled a star-studded cast of commentators, the channel asked Comcast to move it off the sports tier and give it distribution equal to the Golf Channel and Versus.
The viewing audience and advertising base for the tennis and golf offerings were almost identical, it argued, so there could be no legitimate rationale for making the Golf Channel available to all its 23 million subscribers and Tennis to one-tenth of that. Comcast refused, and the battle was joined.
In its defense, Comcast says that it’s hardly the only cable firm to give preference to the Golf Channel, which reaches more than 80 million U.S. homes, or Versus (75 million), compared with Tennis’ 30 million. Solomon says that’s an artifact of long-term contracts locking the Tennis Channel into the sports-tier ghetto, which it signed years ago as a fledgling channel, and in more recent deals Tennis has been moving up — it has as much as 65% penetration of the subscriber base of DirectTV and the Dish Network, for example.
Comcast brass also testified before the FCC judge that when they polled their regional cable system executives, none of them said their subscribers were clamoring for more Tennis Channel. Of course, those regional Comcast execs would have to be idiots not to know what answer their bosses expected them to give, and I’ll do them the courtesy of assuming they’re not idiots.
Plus, it’s not as if Comcast turns up its nose at the commercial potential of tennis. This summer it moved heaven and earth to secure the broadcast and cable rights to the Wimbledon finals for NBC and Versus, only to be outbid by ESPN (which shares Wimbledon coverage with the Tennis Channel). Comcast plainly understands that while its overall ratings may be lower than for other major sports, tennis holds a special attraction for advertisers hawking bejeweled wristwatches, luxury cars and brokerage services.
Indeed, Tennis Channel’s viewers have the highest median household income ($153,900) and net worth ($688,000) of any of the 78 ad-supported cable networks surveyed by the market research firm Ipsos. Golf Channel comes in fourth in both metrics.
Nor can anyone say the FCC wasn’t warned. In its own order approving the Comcast/NBC Universal merger, the commission acknowledged that Comcast routinely discriminated against unaffiliated channels in favor of its own and that it was likely to continue to do so after the merger. This might be one of the rare cases, therefore, of an agency being in a position to say “I told you so” to itself.
You can’t blame Comcast for acting like a pirate. The fault lies with the regulators, which endowed a cable operator that already controlled 1 in 4 American pay-TV households with NBC, a major provider of sports and other programming, and failed to impose ironclad measures to prevent abuse. Instead of handling this problem themselves, they dumped it in the lap of a judge.
Michael Hiltzik’s column appears Sundays and Wednesdays. His latest book is “The New Deal: A Modern History.” Reach him at email@example.com, read past columns at latimes.com/hiltzik, check out facebook.com/hiltzik and follow @latimeshiltzik on Twitter.