The future of Comcastâ€™s OLN network calls for a 40-cent-a-month rate increase and Time Warner possibly taking an equity stake in the network, sources say.
Time Warner has an option to acquire an 11 percent stake in OLN, multiple sources said. Itâ€™s one of many such options that Time Warner Cable has written into carriage deals with cable networks owned by other media companies. The deal with OLN dates back to 2001 when Time Warner reached a new carriage agreement with OLN after Comcast acquired the network.
Time Warner is expected to exercise its option and become part-owner of the network if OLN successfully acquires rights to the NFL or Major League Baseball. OLN, fresh off adding NHL rights, is in talks with both leagues, sources said.
Should OLN add the NFL, internal plans call for the network to ask cable operators to pay 40 cents more per subscriber per month, according to a source with knowledge of OLNâ€™s long-term business plan.
The network now charges most cable and satellite operators about 15 cents a subscriber per month, a source said. According to Comcact COO Steve Burke, OLNâ€™s deals with many operators expire at the end of this year, and the network will increase rates then.
A 40-cent rate hike, if accepted by operators, would mean an additional $307 million on OLNâ€™s books, based on its current subscriber base of 64 million. If OLN added 20 million subscribers at 55 cents a month, a reasonable expectation if it were to add the NFL or MLB, that would mean roughly an additional $132 million in revenue. Therefore, the immediate gain from adding the additional programming would be nearly $440 million a year.
OLN will pay the NHL $65 million this season, plus an additional $15 million if it grows its subscriber base to 80 million or adds another major sports property.
The eight-game Thursday-Saturday NFL package might cost the company as much as $400 million a year, according to industry estimates.
Although the affiliate revenue increases and rights fees appear to counterbalance each other, much of the additional revenue would actually come out of Comcast and Time Warnerâ€™s pockets, as they are the two largest cable operators, with 21 million and 11 million subscribers, respectively, and therefore two of OLNâ€™s largest customers.
OLN, Comcast and Time Warner declined to comment.
from Sports Business Journal