NCTA 2014: John Skipper Defends ESPN's Lofty Subscriber Fees, Dismisses Aereo Threat
ESPN president John Skipper came out swinging against charges that his Disney-owned network is gouging cable operators with high fees that then result in higher costs to consumers -- many of which don't even watch sports.
"At ESPN, our job is to create value and work with distributors," said Skipper, defending cable's highest per-subscriber fee during a panel at the NCTA convention in Los Angeles. "It's the product with the most value. ... There's no question that we sit in a certain catbird seat. Live sports is ascendant. Right now, it's the most powerful form of programing on the planet."
Skipper said he wanted to counter the "canard" that only a few cable subscribers actually watch sports. He noted that 115 million people view ESPN every week, and 85 percent of consumers watch ESPN in every quarter.
Making reference to the battle with Aereo, which wants to deliver over-the-air channels as a package without paying royalties, Skipper said the audience does want to see sports and other things cable offers "no matter what Barry Diller says."
That doesn't mean the rising costs of programing and the increasing fees to consumers are not an issue of importance. Rob Marcus, the recently installed CEO of Time Warner Cable, said there is "no question a model where your cost of goods sold exceeds what the market is wiling to pay is problematic."
Marcus called the situation a fundamental problem: "At the end of the day, we've got to find a say to pay for content that allows us to be more responsive to what users are willing to pay."
Jerald Kent, CEO of Suddenlink Communications, the ninth largest provider of cable and broadband in the U.S., warned "if cable operators continue to raise prices, the government will get involved like they are in Canada with mandated a la carte." He emphasized that programmers are going to have to make tough decisions on what to carry to keep costs under control, predicting some customers will cut the cord as costs continue to rise.
When the conversation turned to finding the next big hit, A+E Networks president and CEO Nancy Dubuc said that unlike technology, making great programs isn't something you can just order up. The other problem, she said, is that with the growth of channels and platforms the "demand for content has never been greater, and the demand for creative talent has never been greater."
"There isn't a secret machine we're putting the information into, and it's not coming out do this show or that one," added Dubuc. "It's a very taste-driven, instinctual part of the business… I worry where the next generation of creators will come from."
John Martin, CEO of Turner Broadcasting, said they are spending $4 billion a year on programming. "In order to stay relevant we need to find those tastemakers" who can create hot new shows, he said, adding (with a nod to Hollywood): "But we've got to have outstanding relations with the creative community."
"There is an arms race for programing," he added. "And there are more and more outlets for people to express their individuality."
Skipper summarized by saying that in the competition for eyeballs and advertisers dollars, the only way to win is with better product. "When Yahoo says it is going to do two comedy series, they are trying to get into our business," he said, noting that new content providers often take over the conversation. "We should be setting the tone of the conversation."